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Condensed Consolidated Financial Statements
September 30, 2020
VIRGIN MEDIA INC.
1550 Wewatta Street, Suite 1000
Denver, Colorado 80202
United States
VIRGIN MEDIA INC.
TABLE OF CONTENTS
Page
Number
FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheets as of September 30, 2020 and December 31, 2019 (unaudited)..................
Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2020 and2019 (unaudited) ........................................................................................................................................................
Condensed Consolidated Statements of Comprehensive Earnings (Loss) for the Three and Nine Months Ended September 30, 2020 and 2019 (unaudited).................................................................................................................
Condensed Consolidated Statements of Owners’ Equity for the Three and Nine Months Ended September 30, 2020and 2019 (unaudited)..................................................................................................................................................
Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2020 and 2019(unaudited) .................................................................................................................................................................
Notes to Condensed Consolidated Financial Statements (unaudited) ...........................................................................
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OFOPERATIONS ...............................................................................................................................................................
1
3
4
5
9
11
48
The accompanying notes are an integral part of these condensed consolidated financial statements.
1
VIRGIN MEDIA INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
September 30,
2020December 31,
2019
in millions
ASSETS
Current assets:
Cash and cash equivalents ........................................................................................................ £ 217.2 £ 34.5
Trade receivables, net ............................................................................................................... 495.4 639.6
Derivative instruments (notes 4, 5 and 10)............................................................................... 154.9 82.5
Prepaid expenses....................................................................................................................... 76.8 64.0
Other current assets (notes 3 and 10)........................................................................................ 150.6 183.2
Total current assets ................................................................................................................. 1,094.9 1,003.8
Property and equipment, net (notes 6 and 8) .............................................................................. 5,954.8 6,078.7
Goodwill (note 6) ........................................................................................................................ 6,020.7 6,005.8
Deferred income taxes (note 9) ................................................................................................... 1,739.5 1,540.4
Related-party notes receivable (note 10)..................................................................................... 5,051.0 4,963.6
Other assets, net (notes 3, 4, 5, 6 and 8) ..................................................................................... 1,158.1 987.4
Total assets ........................................................................................................................... £ 21,019.0 £ 20,579.7
The accompanying notes are an integral part of these condensed consolidated financial statements.
2
VIRGIN MEDIA INC.
CONDENSED CONSOLIDATED BALANCE SHEETS — (Continued)
(unaudited)
September 30,
2020December 31,
2019
in millions
LIABILITIES AND OWNERS’ EQUITY
Current liabilities:
Accounts payable (note 10) ...................................................................................................... £ 307.2 £ 361.5
Deferred revenue (note 3) ......................................................................................................... 352.0 357.8
Current portion of debt and finance lease obligations (notes 7 and 8) ..................................... 1,872.9 1,868.9
Accrued interest ........................................................................................................................ 137.6 133.2
Accrued capital expenditures (note 10) .................................................................................... 126.4 143.9
Other current liabilities (notes 3, 4, 5, 8 and 10) ...................................................................... 836.1 695.0
Total current liabilities ......................................................................................................... 3,632.2 3,560.3
Long-term debt and finance lease obligations (notes 7, 8 and 10).............................................. 10,475.1 10,177.4
Other long-term liabilities (notes 3, 4, 5, 8 and 10) .................................................................... 756.4 612.2
Total liabilities ..................................................................................................................... 14,863.7 14,349.9
Commitments and contingencies (notes 4, 5, 7, 8 and 11)
Owners’ equity:
Parent’s equity:
Additional paid-in capital....................................................................................................... 7,740.2 7,873.4
Accumulated deficit ............................................................................................................... (1,646.3) (1,709.4)
Accumulated other comprehensive earnings, net of taxes ..................................................... 74.1 83.2
Total parent’s equity............................................................................................................. 6,168.0 6,247.2
Noncontrolling interest ............................................................................................................. (12.7) (17.4)
Total owners’ equity .......................................................................................................... 6,155.3 6,229.8
Total liabilities and owners’ equity ................................................................................. £ 21,019.0 £ 20,579.7
The accompanying notes are an integral part of these condensed consolidated financial statements.
3
VIRGIN MEDIA INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
Three months ended Nine months ended
September 30, September 30,
2020 2019 2020 2019
in millions
Revenue (notes 3 and 12)......................................................................... £ 1,291.4 £ 1,281.7 £ 3,791.9 £ 3,836.5
Operating costs and expenses (exclusive of depreciation andamortization, shown separately below):
Programming and other direct costs of services (note 10) .................... 396.3 406.1 1,167.8 1,197.7
Other operating (note 10) ...................................................................... 213.9 178.6 586.5 536.1
Selling, general and administrative (SG&A) (note 10)......................... 184.1 174.3 523.3 540.4
Related-party fees and allocations, net (note 10) .................................. 95.8 65.6 248.2 144.1
Depreciation and amortization .............................................................. 334.4 432.5 1,017.1 1,320.1
Impairment, restructuring and other operating items, net ..................... 7.0 5.4 21.2 46.6
1,231.5 1,262.5 3,564.1 3,785.0
Operating income................................................................................ 59.9 19.2 227.8 51.5
Non-operating income (expense):
Interest expense (note 10)...................................................................... (136.1) (164.0) (430.1) (487.5)
Interest income — related party (note 10)............................................. 61.0 71.3 187.9 213.2
Realized and unrealized gains (losses) on derivative instruments, net(notes 4, 5 and 10).............................................................................. (255.0) 258.2 142.4 319.0
Foreign currency transaction gains (losses), net.................................... 253.6 (207.7) (153.4) (238.2)
Realized and unrealized gains (losses) due to changes in fair valuesof certain debt, net (notes 5 and 7)..................................................... 0.8 (2.2) 7.9 (19.7)
Losses on debt extinguishment, net (note 7) ......................................... (0.1) (23.3) (134.2) (61.2)
Other income (loss), net ........................................................................ (2.9) 1.2 (0.7) 3.7
(78.7) (66.5) (380.2) (270.7)
Loss before income taxes .................................................................... (18.8) (47.3) (152.4) (219.2)
Income tax benefit (expense) (note 9) ..................................................... 209.2 (1.8) 222.0 5.1
Net earnings (loss) ............................................................................ 190.4 (49.1) 69.6 (214.1)
Net earnings attributable to noncontrolling interest................................. (2.0) (1.0) (4.7) (3.0)
Net earnings (loss) attributable to parent.......................................... £ 188.4 £ (50.1) £ 64.9 £ (217.1)
The accompanying notes are an integral part of these condensed consolidated financial statements.
4
VIRGIN MEDIA INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS (LOSS)
(unaudited)
Three months ended Nine months ended
September 30, September 30,
2020 2019 2020 2019
in millions
Net earnings (loss) ....................................................................................... £ 190.4 £ (49.1) £ 69.6 £ (214.1)
Other comprehensive earnings (loss), net of taxes:
Foreign currency translation adjustments and other.................................. (9.9) 11.5 (9.1) 14.0
Other comprehensive earnings (loss) ..................................................... (9.9) 11.5 (9.1) 14.0
Comprehensive earnings (loss) ............................................................ 180.5 (37.6) 60.5 (200.1)
Comprehensive earnings attributable to noncontrolling interest ................. (2.0) (1.0) (4.7) (3.0)
Comprehensive earnings (loss) attributable to parent ....................... £ 178.5 £ (38.6) £ 55.8 £ (203.1)
The accompanying notes are an integral part of these condensed consolidated financial statements.
5
VIRGIN MEDIA INC.
CONDENSED CONSOLIDATED STATEMENT OF OWNERS’ EQUITY
(unaudited)
Parent’s equity
Additionalpaid-incapital
Accumulateddeficit
Accumulatedother
comprehensiveearnings, net
of taxes
Totalparent’sequity
Non-controlling
Interest
Totalowners’equity
in millions
Balance at January 1, 2019........................ £ 7,818.9 £ (1,367.0) £ 89.2 £ 6,541.1 £ — £ 6,541.1
Net loss.................................................... — (112.7) — (112.7) 0.7 (112.0)
Other comprehensive earnings, net oftaxes..................................................... — — 3.5 3.5 — 3.5
Impact of consolidation of the LibertyProperty Companies ............................ 22.5 — — 22.5 (22.5) —
Share-based compensation (note 10) ...... 9.3 — — 9.3 — 9.3
Tax losses surrendered by LibertyGlobal subsidiaries (notes 9 and 10) ... 6.8 — — 6.8 — 6.8
Deemed contribution of technology-related services (note 10)..................... 1.8 — — 1.8 — 1.8
Capital charge in connection with theexercise or vesting of share-basedincentive awards (note 10)................... (1.2) — — (1.2) — (1.2)
Other........................................................ 2.8 — — 2.8 — 2.8
Balance at March 31, 2019........................ 7,860.9 (1,479.7) 92.7 6,473.9 (21.8) 6,452.1
Net loss.................................................... — (54.3) — (54.3) 1.3 (53.0)
Other comprehensive loss, net of taxes... — — (1.0) (1.0) — (1.0)
Conversion of related-party loansreceivable and related accrued interestto equity ............................................... (32.4) — — (32.4) — (32.4)
Tax losses surrendered by LibertyGlobal subsidiaries (notes 9 and 10) ... 13.1 — — 13.1 — 13.1
Share-based compensation (note 10) ...... 12.8 — — 12.8 — 12.8
Capital charge in connection with theexercise or vesting of share-basedincentive awards (note 10)................... (9.4) — — (9.4) — (9.4)
Deemed contribution of technology-related services (note 10)..................... 0.9 — — 0.9 — 0.9
Other........................................................ (0.1) — — (0.1) (0.1)
Balance at June 30, 2019 ........................... £ 7,845.8 £ (1,534.0) £ 91.7 £ 6,403.5 £ (20.5) £ 6,383.0
The accompanying notes are an integral part of these condensed consolidated financial statements.
6
VIRGIN MEDIA INC.
CONDENSED CONSOLIDATED STATEMENT OF OWNERS’ EQUITY — (Continued)
(unaudited)
Parent’s Equity
Additionalpaid-incapital
Accumulateddeficit
Accumulatedother
comprehensiveearnings, net
of taxes
Totalparent’sequity
Non-controlling
Interest
Totalowners’equity
in millions
Balance at June 30, 2019 ........................... £ 7,845.8 £ (1,534.0) £ 91.7 £ 6,403.5 £ (20.5) £ 6,383.0
Net loss.................................................... — (50.1) — (50.1) 1.0 (49.1)
Other comprehensive earnings, net oftaxes..................................................... — — 11.5 11.5 — 11.5
Tax losses surrendered by LibertyGlobal subsidiaries (notes 9 and 10) ... 12.0 — — 12.0 — 12.0
Share-based compensation (note 10) ...... 9.8 — — 9.8 — 9.8
Capital charge in connection with theexercise or vesting of share-basedincentive awards (note 10)................... (3.7) — — (3.7) — (3.7)
Deemed contribution of technology-related services (note 10)..................... 2.4 — — 2.4 — 2.4
Balance at September 30, 2019 ................. £ 7,866.3 £ (1,584.1) £ 103.2 £ 6,385.4 £ (19.5) £ 6,365.9
The accompanying notes are an integral part of these condensed consolidated financial statements.
7
VIRGIN MEDIA INC.
CONDENSED CONSOLIDATED STATEMENT OF OWNERS’ EQUITY — (Continued)
(unaudited)
Parent’s equity
Additionalpaid-incapital
Accumulateddeficit
Accumulatedother
comprehensiveearnings, net
of taxes
Totalparent’sequity
Non-controlling
Interest
Totalowners’equity
in millions
Balance at January 1, 2020, before effectof accounting change ............................. £ 7,873.4 £ (1,709.4) £ 83.2 £ 6,247.2 £ (17.4) £ 6,229.8
Impact of ASU No. 2016-13 (note 2)...... — (1.8) — (1.8) — (1.8)
Balance at January 1, 2020, as adjustedfor accounting change ............................ 7,873.4 (1,711.2) 83.2 6,245.4 (17.4) 6,228.0
Net earnings ............................................ — 81.7 — 81.7 1.4 83.1
Other comprehensive earnings, net oftaxes..................................................... — — 6.7 6.7 — 6.7
Tax losses surrendered to Liberty Globalsubsidiaries (notes 9 and 10) ............... (46.2) — — (46.2) — (46.2)
Share-based compensation (note 10) ...... 7.9 — — 7.9 — 7.9
Deemed contribution of technology-related services (note 10)..................... 5.9 — — 5.9 — 5.9
Capital charge in connection with theexercise or vesting of share-basedincentive awards (note 10)................... (1.6) — — (1.6) — (1.6)
Other........................................................ 2.4 — — 2.4 — 2.4
Balance at March 31, 2020........................ 7,841.8 (1,629.5) 89.9 6,302.2 (16.0) 6,286.2
Net loss.................................................... — (205.2) — (205.2) 1.3 (203.9)
Other comprehensive loss, net of taxes... — — (5.9) (5.9) — (5.9)
Tax losses surrendered by LibertyGlobal subsidiaries (notes 9 and 10) ... 11.9 — — 11.9 — 11.9
Share-based compensation (note 10) ...... 10.9 — — 10.9 — 10.9
Capital charge in connection with theexercise or vesting of share-basedincentive awards (note 10)................... (4.9) — — (4.9) — (4.9)
Deemed contribution of technology-related services (note 10)..................... 3.8 — — 3.8 — 3.8
Other........................................................ 0.4 — — 0.4 — 0.4
Balance at June 30, 2020 ........................... £ 7,863.9 £ (1,834.7) £ 84.0 £ 6,113.2 £ (14.7) £ 6,098.5
The accompanying notes are an integral part of these condensed consolidated financial statements.
8
VIRGIN MEDIA INC.
CONDENSED CONSOLIDATED STATEMENT OF OWNERS’ EQUITY — (Continued)
(unaudited)
Parent’s equity
Additionalpaid-incapital
Accumulateddeficit
Accumulatedother
comprehensiveearnings, net
of taxes
Totalparent’sequity
Non-controlling
Interest
Totalowners’equity
in millions
Balance at June 30, 2020 .......................... £ 7,863.9 £ (1,834.7) £ 84.0 £ 6,113.2 £ (14.7) £ 6,098.5
Net earnings............................................ — 188.4 — 188.4 2.0 190.4
Other comprehensive loss, net of taxes .. — — (9.9) (9.9) — (9.9)
Technology-related transfer pricingtransition fee (note 10)........................ (143.6) — — (143.6) — (143.6)
Share-based compensation (note 10)...... 14.9 — — 14.9 — 14.9
Deemed contribution of technology-related services (note 10) .................... 6.0 — — 6.0 — 6.0
Tax losses surrendered by LibertyGlobal subsidiaries (notes 9 and 10)... 4.9 — — 4.9 — 4.9
Capital charge for technology-relatedservices (note 10)................................ (3.9) — — (3.9) — (3.9)
Capital charge in connection with theexercise or vesting of share-basedincentive awards (note 10).................. (1.7) — — (1.7) — (1.7)
Other....................................................... (0.3) — — (0.3) — (0.3)
Balance at September 30, 2020 .............. £ 7,740.2 £ (1,646.3) £ 74.1 £ 6,168.0 £ (12.7) £ 6,155.3
The accompanying notes are an integral part of these condensed consolidated financial statements.
9
VIRGIN MEDIA INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Nine months ended
September 30,
2020 2019
in millions
Cash flows from operating activities:
Net earnings (loss) ............................................................................................................................ £ 69.6 £ (214.1)
Adjustments to reconcile net earnings (loss) to net cash provided by operating activities:
Share-based compensation expense ............................................................................................... 40.1 37.7
Related-party fees and allocations, net........................................................................................... 248.2 144.1
Depreciation and amortization ....................................................................................................... 1,017.1 1,320.1
Impairment, restructuring and other operating items, net .............................................................. 21.2 46.6
Amortization of deferred financing costs and non-cash interest.................................................... 9.8 11.9
Realized and unrealized gains on derivative instruments, net ....................................................... (142.4) (319.0)
Foreign currency transaction losses, net ........................................................................................ 153.4 238.2
Realized and unrealized losses (gains) due to changes in fair values of certain debt, net ............. (7.9) 19.7
Losses on debt extinguishment, net................................................................................................ 134.2 61.2
Deferred income tax benefit ........................................................................................................... (228.1) (24.4)
Changes in operating assets and liabilities ..................................................................................... 155.2 (65.9)
Net cash provided by operating activities.................................................................................... 1,470.4 1,256.1
Cash flows from investing activities:
Advances to related parties, net ........................................................................................................ (356.1) (35.8)
Capital expenditures, net .................................................................................................................. (313.0) (325.5)
Other investing activities, net ........................................................................................................... (0.8) 1.0
Net cash used by investing activities............................................................................................ £ (669.9) £ (360.3)
The accompanying notes are an integral part of these condensed consolidated financial statements.
10
VIRGIN MEDIA INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS — (Continued)
(unaudited)
Nine months ended
September 30,
2020 2019
in millions
Cash flows from financing activities:
Repayments and repurchases of third-party debt and finance lease obligations .............................. £ (5,597.2) £ (3,521.9)
Borrowings of third-party debt ......................................................................................................... 4,892.0 2,739.8
Net borrowings (repayments) of related-party debt.......................................................................... 174.6 (11.9)
Payment of financing costs and debt premiums ............................................................................... (146.8) (67.9)
Net cash received (paid) related to derivative instruments............................................................... 82.7 (7.3)
Other financing activities, net........................................................................................................... (12.8) 0.5
Net cash used by financing activities ........................................................................................... (607.5) (868.7)
Effect of exchange rate changes on cash and cash equivalents and restricted cash............................ 1.6 0.2
Net increase in cash and cash equivalents and restricted cash .................................................. 194.6 27.3
Cash and cash equivalents and restricted cash:
Beginning of period ................................................................................................................... 58.7 24.4
End of period.............................................................................................................................. £ 253.3 £ 51.7
Cash paid for interest .......................................................................................................................... £ 414.5 £ 553.4
Net cash paid (refunded) for taxes ...................................................................................................... £ 4.6 £ (1.8)
Details of end of period cash and cash equivalents and restricted cash:
Cash and cash equivalents ................................................................................................................ £ 217.2 £ 34.6
Restricted cash included in other current assets and other assets, net .............................................. 36.1 17.1
Total cash and cash equivalents and restricted cash....................................................................... £ 253.3 £ 51.7
VIRGIN MEDIA INC.
Notes to Condensed Consolidated Financial Statements
September 30, 2020
(unaudited)
11
(1) Basis of Presentation
Virgin Media Inc. (Virgin Media) is a wholly-owned subsidiary of Liberty Global plc (Liberty Global). Virgin Media provides
broadband internet, video, fixed-line telephony and mobile services to consumers and businesses in the United Kingdom (U.K.)
and Ireland. In these notes, the terms “we,” “our,” “our company” and “us” may refer, as the context requires, to Virgin Media or
collectively to Virgin Media and its subsidiaries.
Our unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles
generally accepted in the United States (GAAP) and do not include all of the information required by GAAP for complete financial
statements. In the opinion of management, these financial statements reflect all adjustments (consisting of normal recurring
adjustments) necessary for a fair presentation of the results of operations for the interim periods presented. The results of operations
for any interim period are not necessarily indicative of results for the full year. These unaudited condensed consolidated financial
statements should be read in conjunction with the consolidated financial statements and notes thereto included in our 2019 annual
report.
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue
and expenses during the reporting period. Estimates and assumptions are used in accounting for, among other things, the valuation
of acquisition-related assets and liabilities, allowances for uncollectible accounts, certain components of revenue, programming
and copyright costs, deferred income taxes and related valuation allowances, loss contingencies, fair value measurements,
impairment assessments, capitalization of internal costs associated with construction and installation activities, lease terms, useful
lives of long-lived assets, share-based compensation and actuarial liabilities associated with certain benefit plans. Actual results
could differ from those estimates.
On May 7, 2020, Liberty Global entered into a Contribution Agreement (the Contribution Agreement) with, among others,
Telefonica, SA (Telefonica). Pursuant to the Contribution Agreement, Liberty Global and Telefonica agreed to form a 50:50 joint
venture (the U.K. JV), which will combine our company’s operations in the U.K. along with certain other Liberty Global
subsidiaries created as a result of the pending U.K. JV (together, the U.K. JV Entities) with Telefonica’s mobile business in the
U.K. to create a nationwide integrated communications provider. In connection with the transaction, we have completed certain
recapitalization financings, as described in note 7. The outstanding third-party debt associated with the U.K. JV Entities will be
contributed in full to the U.K. JV. The transaction will not trigger a change of control under Virgin Media’s debt agreements.
The U.K. JV intends to distribute available cash to the shareholders periodically and is expected to undertake periodic further
recapitalizations, subject to market and operating conditions, to maintain a target net leverage ratio ranging between 4.0 and 5.0
times EBITDA (as defined in the applicable shareholders’ agreement). The consummation of the transaction contemplated by
the Contribution Agreement is subject to certain conditions, including competition clearance by the applicable regulatory
authorities. The Contribution Agreement also includes customary termination rights, including a right of the parties to terminate
the agreement if the transaction has not closed within 24 months following the date of the Contribution Agreement, which may
be extended by six months under certain circumstances.
Unless otherwise indicated, convenience translations into pound sterling are calculated as of September 30, 2020.
Certain prior period amounts have been reclassified to conform to the current period presentation.
These unaudited condensed consolidated financial statements reflect our consideration of the accounting and disclosure
implications of subsequent events through November 17, 2020, the date of issuance.
VIRGIN MEDIA INC.
Notes to Condensed Consolidated Financial Statements — (Continued)
September 30, 2020
(unaudited)
12
(2) Accounting Changes and Recent Accounting Pronouncements
Accounting Changes
ASU 2018-15
In August 2018, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2018-15,
Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract (ASU
2018-15), which requires entities to defer implementation costs incurred that are related to the application development stage in
a cloud computing arrangement that is a service contract. ASU 2018-15 requires deferred implementation costs to be amortized
over the term of the cloud computing arrangement and presented in the same expense line item as the cloud computing arrangement.
All other implementation costs are generally expensed as incurred. We adopted ASU 2018-15 on January 1, 2020 on a prospective
basis. As a result of the adoption of ASU 2018-15, (i) certain implementation costs that were previously expensed as incurred are
now deferred as prepaid expenses and amortized over the term of the cloud computing arrangement and (ii) certain costs associated
with developing interfaces between a cloud computing arrangement and internal-use software that were previously capitalized as
property and equipment are now deferred as prepaid expenses and amortized over the term of the cloud computing arrangement.
The adoption of ASU 2018-15 did not have a significant impact on our consolidated financial statements.
ASU 2016-13
In June 2016, the FASB issued ASU No. 2016-13, Measurement of Credit Losses on Financial Statements (ASU 2016-13),
which changes the recognition model for credit losses related to assets held at amortized cost. ASU 2016-13 eliminates the threshold
that a loss must be considered probable to recognize a credit loss and instead requires an entity to reflect its current estimate of
lifetime expected credit losses. We adopted ASU 2016-13 on January 1, 2020 on a modified retrospective basis by recording a
cumulative effect adjustment of £1.8 million to our accumulated deficit related to increases to our allowances for certain trade and
notes receivable.
Recent Accounting Pronouncements
ASU 2019-12
In December 2019, the FASB issued ASU No. 2019-12, Simplifying the Accounting for Income Taxes (ASU 2019-12), which
is intended to improve consistency and simplify several areas of existing guidance. ASU 2019-12 removes certain exceptions to
the general principles related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an
interim period and the recognition of deferred tax liabilities for outside basis differences. The new guidance also clarifies the
accounting for transactions that result in a step-up in the tax basis of goodwill. ASU 2019-12 is effective for annual reporting
periods beginning after December 15, 2021, including interim periods within those fiscal years, with early adoption permitted. We
do not expect the adoption of ASU 2019-12 to have a significant impact on our consolidated financial statements.
(3) Revenue Recognition and Related Costs
Contract Balances
The timing of our recognition of revenue may differ from the timing of invoicing our customers. We record a trade receivable
when we have transferred goods or services to a customer but have not yet received payment. Our trade receivables are reported
net of an allowance for doubtful accounts. Such allowance aggregated £34.2 million and £22.9 million at September 30, 2020 and
December 31, 2019, respectively.
If we transfer goods or services to a customer but do not have an unconditional right to payment, we record a contract asset.
Contract assets typically arise from the uniform recognition of introductory promotional discounts over the contract period and
accrued revenue for handset sales. Our contract assets were £2.9 million and £11.3 million as of September 30, 2020 and
December 31, 2019, respectively. The current and long-term portions of our contract asset balances are included within other
current assets and other assets, net, respectively, on our condensed consolidated balance sheets.
VIRGIN MEDIA INC.
Notes to Condensed Consolidated Financial Statements — (Continued)
September 30, 2020
(unaudited)
13
We record deferred revenue when we receive payment prior to transferring goods or services to a customer. We primarily
defer revenue for (i) installation and other upfront services and (ii) other services that are invoiced prior to when services are
provided. Our deferred revenue balances were £371.9 million and £380.1 million as of September 30, 2020 and December 31,
2019, respectively. The decrease in deferred revenue for the nine months ended September 30, 2020 is primarily due to the
recognition of £342.7 million of revenue that was included in our deferred revenue balance at December 31, 2019, partially offset
by advanced billings recorded during the period. The long-term portions of our deferred revenue balances are included within
other long-term liabilities on our condensed consolidated balance sheets.
Contract Costs
Our aggregate assets associated with incremental costs to obtain and fulfill our contracts were £64.4 million and £53.4 million
at September 30, 2020 and December 31, 2019, respectively. The current and long-term portions of our assets related to contract
costs are included within other current assets and other assets, net, respectively, on our condensed consolidated balance sheets.
We amortized £21.8 million and £60.4 million during the three and nine months ended September 30, 2020, respectively, and
£14.8 million and £43.9 million during the three and nine months ended September 30, 2019, respectively, to operating costs and
expenses related to these assets.
Unsatisfied Performance Obligations
A large portion of our revenue is derived from customers who are not subject to contracts. Revenue from customers who are
subject to contracts is generally recognized over the term of such contracts, which is typically 12 months for our residential service
contracts, one to three years for our mobile service contracts and one to five years for our business-to-business (B2B) service
contracts.
(4) Derivative Instruments
In general, we enter into derivative instruments to protect against (i) increases in the interest rates on our variable-rate debt
and (ii) foreign currency movements, particularly with respect to borrowings that are denominated in a currency other than the
functional currency of the borrowing entity. In this regard, we have entered into various derivative instruments to manage interest
rate exposure and foreign currency exposure with respect to the United States (U.S.) dollar ($), the euro (€) and the Indian rupee.
We do not apply hedge accounting to our derivative instruments. Accordingly, changes in the fair values of most of our derivative
instruments are recorded in realized and unrealized gains or losses on derivative instruments, net, in our condensed consolidated
statements of operations.
The following table provides details of the fair values of our derivative instrument assets and liabilities:
September 30, 2020 December 31, 2019
Current Long-term Total Current Long-term Total
in millions
Assets (a):
Cross-currency and interest ratederivative contracts (b) ........................ £ 154.9 £ 739.8 £ 894.7 £ 82.5 £ 431.1 £ 513.6
Liabilities (a):
Cross-currency and interest ratederivative contracts (b) ........................ £ 146.6 £ 552.1 £ 698.7 £ 133.1 £ 402.8 £ 535.9
Foreign currency forward and optioncontracts............................................... 0.8 — 0.8 0.5 — 0.5
Total.................................................... £ 147.4 £ 552.1 £ 699.5 £ 133.6 £ 402.8 £ 536.4
_______________
(a) Our current derivative liabilities, long-term derivative assets and long-term derivative liabilities are included in other current
liabilities, other assets, net, and other long-term liabilities, respectively, on our condensed consolidated balance sheets.
VIRGIN MEDIA INC.
Notes to Condensed Consolidated Financial Statements — (Continued)
September 30, 2020
(unaudited)
14
(b) We consider credit risk relating to our and our counterparties’ nonperformance in the fair value assessment of our derivative
instruments. In all cases, the adjustments take into account offsetting liability or asset positions. The changes in the credit
risk valuation adjustments associated with our cross-currency and interest rate derivative contracts resulted in a net gain
(loss) of £40.6 million and (£15.1 million) during the three months ended September 30, 2020 and 2019, respectively, and
£45.8 million and (£17.3 million) during the nine months ended September 30, 2020 and 2019, respectively. These amounts
are included in realized and unrealized gains (losses) on derivative instruments, net, in our condensed consolidated statements
of operations. For further information regarding our fair value measurements, see note 5.
The details of our realized and unrealized gains (losses) on derivative instruments, net, are as follows:
Three months ended Nine months ended
September 30, September 30,
2020 2019 2020 2019
in millions
Cross-currency and interest rate derivative contracts .......................... £ (253.4) £ 257.6 £ 143.0 £ 318.3
Foreign currency forward and option contracts:
Third-party......................................................................................... (1.6) 0.6 (0.6) 1.6
Related-party ..................................................................................... — — — (0.9)
Total................................................................................................. £ (255.0) £ 258.2 £ 142.4 £ 319.0
The net cash received or paid related to our derivative instruments is classified as an operating, investing or financing activity
in our condensed consolidated statements of cash flows based on the objective of the derivative instrument and the classification
of the applicable underlying cash flows. For derivative contracts that are terminated prior to maturity, the cash paid or received
upon termination that relates to future periods is classified as a financing activity. The following table sets forth the classification
of the net cash inflows (outflows) of our derivative instruments:
Nine months ended
September 30,
2020 2019
in millions
Operating activities ............................................................................................................................. £ (158.3) £ (69.8)
Financing activities ............................................................................................................................. 82.7 (7.3)
Total................................................................................................................................................ £ (75.6) £ (77.1)
Counterparty Credit Risk
We are exposed to the risk that the counterparties to our derivative instruments will default on their obligations to us. We
manage these credit risks through the evaluation and monitoring of the creditworthiness of, and concentration of risk with, the
respective counterparties. In this regard, credit risk associated with our derivative instruments is spread across a relatively broad
counterparty base of banks and financial institutions. Collateral is generally not posted by either party under our derivative
instruments. At September 30, 2020, our exposure to counterparty credit risk included derivative assets with an aggregate fair
value of £258.1 million.
VIRGIN MEDIA INC.
Notes to Condensed Consolidated Financial Statements — (Continued)
September 30, 2020
(unaudited)
15
Details of our Derivative Instruments
Cross-currency Derivative Contracts
We generally match the denomination of our borrowings with the functional currency of the supporting operations, or when
it is more cost effective, we provide for an economic hedge against foreign currency exchange rate movements by using derivative
instruments to synthetically convert unmatched debt into the applicable underlying currency. At September 30, 2020, substantially
all of our debt was either directly or synthetically matched to the functional currency of the borrowing entity. The following table
sets forth the total notional amounts and the related weighted average remaining contractual lives of our cross-currency swap
contracts at September 30, 2020:
Notional amount due from counterparty Notional amount due to counterparty Weighted average remaining life
in millions in years
$ 11,861.4 £ 8,857.4 (a) 5.5
£ 2,296.2 $ 3,300.0 (b) 4.3
€ 500.0 £ 445.6 7.8
£ 394.2 $ 500.0 4.8
$ 166.6 € 150.0 7.8
_______________
(a) Includes certain derivative instruments that are “forward-starting,” such that the initial exchange occurs at a date subsequent
to September 30, 2020. These instruments are typically entered into in order to extend existing hedges without the need to
amend existing contracts.
(b) These derivative instruments do not involve the exchange of notional amounts at the inception and maturity of the
instruments. Accordingly, the only cash flows associated with these derivative instruments are coupon-related payments
and receipts.
Interest Rate Swap Contracts
The following table sets forth the total pound sterling equivalents of the notional amounts and the related weighted average
remaining contractual lives of our interest rate swap contracts at September 30, 2020:
Pay fixed rate (a) Receive fixed rate (a)
Notional amountWeighted average
remaining life Notional amountWeighted average
remaining life
in millions in years in millions in years
£ 21,675.0 3.8 £ 6,990.1 4.0
______________
(a) Includes forward-starting derivative instruments.
VIRGIN MEDIA INC.
Notes to Condensed Consolidated Financial Statements — (Continued)
September 30, 2020
(unaudited)
16
Interest Rate Swap Options
We have entered into various interest rate swap options (swaptions), which give us the right, but not the obligation, to enter
into certain interest rate swap contracts at set dates in the future, with each such contract having a life of no more than three years.
At the transaction date, the strike rate of each of these contracts was above the corresponding market rate. The following table sets
forth certain information regarding our swaptions at September 30, 2020:
Notional amount Underlying swap currencyWeighted average option
expiration period (a)Weighted average
strike rate (b)
in millions in years
£ 3,348.7 £ 0.7 2.37%
£ 208.8 € 0.3 1.84%
______________
(a) Represents the weighted average period until the date on which we have the option to enter into the interest rate swap
contracts.
(b) Represents the weighted average interest rate that we would pay if we exercised our option to enter into the interest rate
swap contracts.
Basis Swaps
Our basis swaps involve the exchange of attributes used to calculate our floating interest rates, including (i) the benchmark
rate, (ii) the underlying currency and/or (iii) the borrowing period. We typically enter into these swaps to optimize our interest rate
profile based on our current evaluations of yield curves, our risk management policies and other factors. At September 30, 2020,
the total pound sterling equivalent of the notional amount due from the counterparty, including forward-starting derivative
instruments, was £3,532.5 million (including £3,456.0 million subject to a 0.0% floor) and the related weighted average remaining
contractual life of our basis swap contracts was 0.8 years.
Interest Rate Caps and Floors
From time to time, we enter into interest rate cap and floor agreements. Purchased interest rate caps lock in a maximum interest
rate if variable rates rise, but also allow our company to benefit from declines in market rates. Purchased interest rate floors protect
us from interest rates falling below a certain level, generally to match a floating rate floor on a debt instrument. At September 30,
2020, the pound sterling equivalent notional amounts of our purchased interest rate caps and floors were £1,586.8 million and
£3,456.0 million, respectively.
Impact of Derivative Instruments on Borrowing Costs
Excluding forward-starting instruments and swaptions, the impact of the derivative instruments that mitigate our foreign
currency and interest rate risk, as described above, was an increase of 54 basis points to our borrowing costs as of September 30,
2020.
Foreign Currency Forwards and Options
We enter into foreign currency forward and option contracts with respect to non-functional currency exposure. As of
September 30, 2020, the total notional amount of our foreign currency forward and option contracts was £29.1 million.
VIRGIN MEDIA INC.
Notes to Condensed Consolidated Financial Statements — (Continued)
September 30, 2020
(unaudited)
17
(5) Fair Value Measurements
We use the fair value method to account for (i) our derivative instruments and (ii) certain instruments that we classify as debt.
The reported fair values of these instruments as of September 30, 2020 are unlikely to represent the value that will be paid or
received upon the ultimate settlement or disposition of these assets and liabilities.
GAAP provides for a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into
three broad levels. Level 1 inputs are quoted market prices in active markets for identical assets or liabilities that the reporting
entity has the ability to access at the measurement date. Level 2 inputs are inputs other than quoted market prices included within
Level 1 that are observable for the asset or liability, either directly or indirectly. Level 3 inputs are unobservable inputs for the
asset or liability. We record transfers of assets or liabilities into or out of Levels 1, 2 or 3 at the beginning of the quarter during
which the transfer occurred.
We use a Monte Carlo based approach to incorporate a credit risk valuation adjustment in our fair value measurements to
estimate the impact of both our own nonperformance risk and the nonperformance risk of our counterparties. Our credit risk
valuation adjustments with respect to our cross-currency and interest rate swaps and certain of our debt are quantified and further
explained in notes 4 and 7.
For additional information concerning our fair value measurements, see note 6 to the consolidated financial statements included
in our 2019 annual report.
A summary of our assets and liabilities that are measured at fair value on a recurring basis is as follows:
Fair value measurements atSeptember 30, 2020 using:
DescriptionSeptember 30,
2020
Significant otherobservable inputs
(Level 2)
Significantunobservable
inputs (Level 3)
in millions
Assets:
Cross-currency and interest rate derivative contracts ............... £ 894.7 £ 894.7 £ —
Liabilities:
Derivative instruments:
Cross-currency and interest rate derivative contracts ............... £ 698.7 £ 678.4 £ 20.3
Foreign currency forward and option contracts........................ 0.8 0.8 —
Debt ............................................................................................. 25.8 25.8 —
Total liabilities........................................................................ £ 725.3 £ 705.0 £ 20.3
VIRGIN MEDIA INC.
Notes to Condensed Consolidated Financial Statements — (Continued)
September 30, 2020
(unaudited)
18
Fair value measurements at December 31, 2019 using:
Description December 31, 2019
Significant otherobservable inputs
(Level 2)
Significantunobservable
inputs (Level 3)
in millions
Assets:
Cross-currency and interest rate derivative contracts ............... £ 513.6 £ 513.6 £ —
Liabilities:
Derivative instruments:
Cross-currency and interest rate derivative contracts ............... £ 535.9 £ 517.2 £ 18.7
Foreign currency forward and option contracts........................ 0.5 0.5 —
Debt ............................................................................................. 34.4 34.4 —
Total liabilities........................................................................ £ 570.8 £ 552.1 £ 18.7
(6) Long-lived Assets
Property and Equipment, Net
The details of our property and equipment and the related accumulated depreciation are set forth below:
September 30,2020
December 31,2019
in millions
Distribution systems.................................................................................................................... £ 9,279.9 £ 8,749.6
Customer premises equipment .................................................................................................... 2,423.4 2,238.3
Support equipment, buildings and land....................................................................................... 1,835.8 1,718.5
Total property and equipment, gross ........................................................................................ 13,539.1 12,706.4
Accumulated depreciation........................................................................................................... (7,584.3) (6,627.7)
Total property and equipment, net (a) .................................................................................... £ 5,954.8 £ 6,078.7
_______________
(a) For additional information regarding finance leases included within our property and equipment, see note 8.
During the nine months ended September 30, 2020 and 2019, we recorded non-cash increases to our property and equipment
related to vendor financing arrangements of £548.0 million and £625.7 million, respectively, which exclude related value-added-
taxes (VAT) of £94.7 million and £108.7 million, respectively, that were also financed under these arrangements.
Goodwill
The change in the carrying amount of our goodwill during the nine months ended September 30, 2020 is due to foreign currency
translation adjustments.
If, among other factors, (i) our enterprise value or Liberty Global’s equity values were to decline or (ii) the adverse impacts
of economic, competitive, regulatory or other factors (including with respect to the recent outbreak of a novel strain of the
coronavirus (COVID-19)) were to cause our results of operations or cash flows to be worse than anticipated, we could conclude
in future periods that impairment charges are required in order to reduce the carrying values of our goodwill and, to a lesser extent,
other long-lived assets. Any such impairment charges could be significant.
VIRGIN MEDIA INC.
Notes to Condensed Consolidated Financial Statements — (Continued)
September 30, 2020
(unaudited)
19
Intangible Assets Subject to Amortization, Net
The details of our intangible assets subject to amortization, which are included in other assets, net, on our condensed
consolidated balance sheets, are set forth below:
September 30,2020
December 31,2019
in millions
Gross carrying amount ................................................................................................................ £ 617.9 £ 2,527.6
Accumulated amortization .......................................................................................................... (568.4) (2,419.6)
Net carrying amount ................................................................................................................ £ 49.5 £ 108.0
(7) Debt
The pound sterling equivalents of the components of our third-party debt are as follows:
September 30, 2020
Weightedaverage
interest rate (a)
Unusedborrowing
capacity (b)
Principal amount
September 30,2020
December 31,2019
in millions
VM Senior Secured Notes........................................................... 5.09% £ — £ 4,494.3 £ 4,461.2
VM Credit Facilities (c) .............................................................. 2.78% 1,000.0 4,168.1 4,126.7
VM Senior Notes ........................................................................ 4.52% — 1,170.3 1,194.2
Vendor financing (d) ................................................................... 4.52% — 1,938.1 1,835.0
Other (e) ...................................................................................... 2.01% — 317.7 337.1
Total third-party debt before deferred financing costs,discounts and premiums (f)................................................... 4.07% £ 1,000.0 £ 12,088.5 £ 11,954.2
The following table provides a reconciliation of total third-party debt before deferred financing costs, discounts and premiums
to total debt and finance lease obligations:
September 30,2020
December 31,2019
in millions
Total third-party debt before deferred financing costs, discounts and premiums....................... £ 12,088.5 £ 11,954.2
Deferred financing costs, discounts and premiums, net.............................................................. (21.7) (17.5)
Total carrying amount of third-party debt ................................................................................ 12,066.8 11,936.7
Finance lease obligations (note 8)............................................................................................... 49.1 52.9
Total third-party debt and finance lease obligations .............................................................. 12,115.9 11,989.6
Related-party debt (note 10) ....................................................................................................... 232.1 56.7
Total debt and finance lease obligations .............................................................................. 12,348.0 12,046.3
Current maturities of debt and finance lease obligations ............................................................ (1,872.9) (1,868.9)
Long-term debt and finance lease obligations ............................................................................ £ 10,475.1 £ 10,177.4
VIRGIN MEDIA INC.
Notes to Condensed Consolidated Financial Statements — (Continued)
September 30, 2020
(unaudited)
20
_______________
(a) Represents the weighted average interest rate in effect at September 30, 2020 for all borrowings outstanding pursuant to
each debt instrument, including any applicable margin. The interest rates presented represent stated rates and do not include
the impact of derivative instruments, deferred financing costs, original issue premiums or discounts and commitment fees,
all of which affect our overall cost of borrowing. Including the effects of derivative instruments, original issue premiums
or discounts and commitment fees, but excluding the impact of deferred financing costs, the weighted average interest rate
on our aggregate third-party variable- and fixed-rate indebtedness was 4.70% at September 30, 2020. For information
regarding our derivative instruments, see note 4.
(b) The VM Credit Facilities include the VM Revolving Facility, a multi-currency revolving facility with maximum borrowing
capacity equivalent to £1,000.0 million, which was undrawn at September 30, 2020. Unused borrowing capacity represents
the maximum availability under the VM Credit Facilities at September 30, 2020 without regard to covenant compliance
calculations or other conditions precedent to borrowing. At September 30, 2020, based on the most restrictive applicable
leverage covenants and leverage-based restricted payment tests, the equivalent of £276.7 million of unused borrowing
capacity was available to be borrowed and there were no additional restrictions on our ability to make loans or distributions
from this availability to other Virgin Media subsidiaries and ultimately to Virgin Media. Upon completion of the relevant
September 30, 2020 compliance reporting requirements, and based on the most restrictive applicable leverage covenants
and leverage-based restricted payment tests, we expect the equivalent of £571.5 million of unused borrowing capacity will
be available, with no additional restriction to loan or distribute. Our above expectations do not consider any actual or potential
changes to our borrowing levels or any amounts loaned or distributed subsequent to September 30, 2020, or the impact of
additional amounts that may be available to borrow, loan or distribute under certain defined baskets within the VM Credit
Facilities.
(c) Principal amounts include £27.2 million and £103.6 million at September 30, 2020 and December 31, 2019, respectively,
of borrowings pursuant to excess cash facilities under the VM Credit Facilities. These borrowings are owed to certain non-
consolidated special purpose financing entities that have issued notes to finance the purchase of receivables due from our
company to certain other third parties for amounts that we and our subsidiaries have vendor financed. To the extent the
proceeds from these notes exceed the amount of vendor financed receivables available to be purchased, the excess proceeds
are used to fund these excess cash facilities.
(d) Represents amounts owed to various creditors pursuant to interest-bearing vendor financing arrangements that are used to
finance certain of our property and equipment additions and operating expenses. These arrangements extend our repayment
terms beyond a vendor’s original due dates (e.g. extension beyond a vendor’s customary payment terms, which are generally
90 days or less) and as such are classified outside of accounts payable on our condensed consolidated balance sheet. These
obligations are generally due within one year and include VAT that was also financed under these arrangements. Repayments
of vendor financing obligations are included in repayments and repurchases of third-party debt and finance lease obligations
in our condensed consolidated statements of cash flows.
(e) Principal amounts include amounts associated with certain derivative-related borrowing instruments, including £25.8 million
and £34.4 million at September 30, 2020 and December 31, 2019, respectively, carried at fair value. These instruments
mature at various dates through January 2025. The fair value of this debt includes credit risk valuation adjustments resulting
in net gains of £0.4 million and £3.3 million during the three months ended September 30, 2020 and 2019, respectively,
and a net gain (loss) of £0.7 million and (£3.9 million) during the nine months ended September 30, 2020 and 2019,
respectively, which are included in realized and unrealized gains (losses) due to changes in fair values of certain debt, net,
in our condensed consolidated statements of operations. For further information regarding our fair value measurements,
see note 5. In addition, the December 31, 2019 principal amount includes £199.5 million of debt collateralized by certain
trade receivables of our company (VM Receivables Financing). During the third quarter of 2020, the amount outstanding
under the VM Receivables Financing was repaid, and the associated trade receivables were sold to a third party (the VM
Receivables Financing Sale). The September 30, 2020 principal amount includes £215.3 million related to the 2020
Receivables Notes, as defined and described below.
(f) As of September 30, 2020 and December 31, 2019, our debt had an estimated fair value of £12.1 billion and £12.3 billion,
respectively. The estimated fair values of our debt instruments are generally determined using the average of applicable bid
and ask prices (mostly Level 1 of the fair value hierarchy) or, when quoted market prices are unavailable or not considered
VIRGIN MEDIA INC.
Notes to Condensed Consolidated Financial Statements — (Continued)
September 30, 2020
(unaudited)
21
indicative of fair value, discounted cash flow models (mostly Level 2 of the fair value hierarchy). The discount rates used
in the cash flow models are based on the market interest rates and estimated credit spreads, to the extent available, and other
relevant factors. For additional information regarding fair value hierarchies, see note 5.
Financing Transactions
Below we provide summary descriptions of any financing transactions completed during the first nine months of 2020. A
portion of our financing transactions may include non-cash borrowings and repayments. During the nine months ended September
30, 2020 and 2019, we did not have any non-cash borrowings and repayments. Unless otherwise noted, the terms and conditions
of certain new notes and/or credit facilities are largely consistent with those of existing notes and credit facilities with regard to
covenants, events of default and change of control provisions, among other items. For information regarding the general terms
and conditions of our debt and capitalized terms not defined herein, see note 8 to the consolidated financial statements included
in our 2019 annual report.
Trade Receivables Transaction. In May 2020, Virgin Media Trade Receivables Financing plc, which is a third-party special
purpose financing entity created for the purpose of facilitating the offering of certain notes, issued £215.3 million principal amount
of sterling-denominated senior secured notes (the 2020 Receivables Notes). The 2020 Receivables Notes are collateralized by
certain of our trade receivables, creating a variable interest in which we are the primary beneficiary and, accordingly, we are
required to consolidate Virgin Media Trade Receivables Financing plc. The offering of these notes resulted in net proceeds of
£214.4 million (the May 2020 Proceeds), which were utilized as described below.
Senior Notes Transactions. In June 2020, we issued $675.0 million (£522.8 million) principal amount of U.S. dollar-
denominated senior notes (the 2030 VM Dollar Senior Notes). The 2030 VM Dollar Senior Notes were issued at par, mature on
July 15, 2030 and bear interest at a rate of 5.0%. The net proceeds from the issuance of these notes, together with the May 2020
Proceeds, were used to redeem in full (i) €460.0 million (£417.6 million) outstanding principal amount of 2025 VM Euro Senior
Notes and (ii) $388.7 million (£301.1 million) outstanding principal amount of 2025 VM Dollar Senior Notes. We then issued (a)
an additional $250.0 million (£193.6 million) principal amount of 2030 VM Dollar Senior Notes at 101% of par and (b) €500.0
million (£453.9 million) principal amount of euro-denominated senior notes (the 2030 VM Euro Senior Notes). The 2030 VM
Euro Senior Notes were issued at par, mature on July 15, 2030 and bear interest at a rate of 3.75%. The net proceeds from the
issuance of these notes were used (1) to redeem in full (A) $497.0 million (£384.9 million) outstanding principal amount of 2024
VM Dollar Senior Notes, (B) $71.6 million (£55.5 million) outstanding principal amount of 2022 VM 4.875% Dollar Senior Notes,
(C) $51.5 million (£39.9 million) outstanding principal amount of 2022 VM 5.25% Dollar Senior Notes and (D) £44.1 million
outstanding principal amount of 2022 VM Sterling Senior Notes and (2) for general corporate purposes. In connection with these
transactions, we recognized a net loss on debt extinguishment of £46.2 million related to (I) the payment of £40.8 million of
redemption premiums and (II) the write-off of £5.4 million of unamortized deferred financing costs, discounts and premiums.
Senior Secured Notes Transactions. In June 2020, we issued (i) $650.0 million (£503.4 million) principal amount of U.S.
dollar-denominated senior secured notes (the 2030 VM Dollar Senior Secured Notes) and (ii) £450.0 million principal amount
of sterling-denominated senior secured notes (the 2030 VM 4.125% Sterling Senior Secured Notes). The 2030 VM Dollar Senior
Secured Notes and 2030 VM 4.125% Sterling Senior Secured Notes were each issued at par, mature on August 15, 2030 and bear
interest at a rate of 4.5% and 4.125%, respectively. The net proceeds from the issuance of these notes, together with existing cash,
were used to (a) redeem in full £525.0 million outstanding principal amount of 2027 VM 4.875% Sterling Senior Secured Notes,
(b) redeem in full £360.0 million outstanding principal amount of 2029 VM 6.25% Sterling Senior Secured Notes and (c) redeem
£80.0 million of the £521.3 million outstanding principal amount of 2025 VM Sterling Senior Secured Notes. In connection with
these transactions, we recognized a net loss on debt extinguishment of £52.4 million related to (1) the payment of £51.7 million
of redemption premiums and (2) the write-off of £0.7 million of unamortized deferred financing costs, discounts and premiums.
VIRGIN MEDIA INC.
Notes to Condensed Consolidated Financial Statements — (Continued)
September 30, 2020
(unaudited)
22
Subject to the circumstances described below, the following notes are non-callable prior to the applicable Call Dates as
presented in the below table. At any time prior to the respective Call Date, we may redeem some or all of the applicable notes by
paying a “make-whole” premium, which is the present value of all remaining scheduled interest payments to the applicable Call
Date using the discount rate (as specified in the applicable indenture) as of the redemption date plus 50 basis points.
Call Date
2030 VM Dollar Senior Notes July 15, 2025
2030 VM Euro Senior Notes July 15, 2025
2030 VM Dollar Senior Secured Notes August 15, 2025
2030 VM 4.125% Sterling Senior Secured Notes August 15, 2025
On or after the applicable Call Date, we may redeem some or all of the applicable notes at the following redemption prices
(expressed as a percentage of the principal amount) plus accrued and unpaid interest and additional amounts (as specified in the
applicable indenture), if any, to the applicable redemption date, as set forth below:
Redemption Price
2030 VM DollarSenior Notes
2030 VM EuroSenior Notes
2030 VM DollarSenior Secured
Notes
2030 VM 4.125%Sterling SeniorSecured Notes
12-month period commencing ........... July 15 July 15 August 15 August 15
2025.................................................... 102.500% 101.875% 102.250% 102.063%
2026.................................................... 101.250% 100.938% 101.125% 101.031%
2027.................................................... 100.625% 100.469% 100.563% 100.516%
2028 and thereafter............................. 100.000% 100.000% 100.000% 100.000%
In November 2020, we issued, via a private placement, an additional (i) $265.0 million (£205.3 million) principal amount of
2030 VM Dollar Senior Secured Notes, (ii) £235.0 million principal amount of 4.25% sterling-denominated senior secured notes
and (iii) £30.0 million principal amount of 2030 VM 4.125% Sterling Senior Secured Notes. The proceeds from the issuance of
these notes were used (a) to redeem in full the £441.3 million outstanding principal amount of 2025 VM Sterling Senior Secured
Notes and (b) for general corporate purposes.
Vendor Financing Notes Transactions. In June 2020, Virgin Media Vendor Financing Notes III Designated Activity Company
(Virgin Media Financing III Company) and Virgin Media Vendor Financing Notes IV Designated Activity Company (Virgin
Media Financing IV Company, and together with Virgin Media Financing III Company, the 2020 VM Financing Companies)
were created for the purpose of issuing certain vendor financing notes. The 2020 VM Financing Companies are third-party special
purpose financing entities that are not consolidated by Virgin Media.
Virgin Media Financing III Company issued (i) £500.0 million principal amount of 4.875% vendor financing notes at par and
(ii) £400.0 million principal amount of 4.875% vendor financing notes at 99.5% of par, each due July 15, 2028 (together, the VM
Vendor Financing III Notes). Virgin Media Financing IV Company issued $500.0 million (£387.3 million) principal amount of
5.0% vendor financing notes due July 15, 2028 at par (the VM Vendor Financing IV Notes, and together with the VM Vendor
Financing III Notes, the June 2020 Vendor Financing Notes). The net proceeds from the June 2020 Vendor Financing Notes were
used by the 2020 VM Financing Companies to purchase certain vendor-financed receivables owed by our company and our
subsidiaries from previously-existing third-party special purpose financing entities (the Original VM Financing Companies) and
various other third parties. As a result, we paid £33.5 million of redemption premiums, which is included in losses on debt
extinguishment, net, in our condensed consolidated statement of operations for the nine months ended September 30, 2020. To
the extent that the proceeds from the June 2020 Vendor Financing Notes exceed the amount of vendor-financed receivables available
to be purchased from the Original VM Financing Companies, and various other third parties, the excess proceeds are used to fund
excess cash facilities under certain of our credit facilities. As additional vendor financed receivables become available for purchase,
the 2020 VM Financing Companies can request that we repay any amounts available under these excess cash facilities.
VIRGIN MEDIA INC.
Notes to Condensed Consolidated Financial Statements — (Continued)
September 30, 2020
(unaudited)
23
Other Financing Transactions
Facility Transactions. In September 2020, in connection with the pending formation of the U.K. JV, (i) certain financial
institutions (the VM O2 Lenders) entered into a commitment letter with, among others, certain of the U.K. JV Entities pursuant
to which the VM O2 Lenders set out the terms on which they are willing to provide VMED O2 UK Holdco 4 Limited (the New
VM Credit Facility Borrower), an entity outside of Virgin Media that is included in the U.K. JV Entities, a £1,500.0 million term
loan facility (VM O2 Facility P), (ii) the New VM Credit Facility Borrower entered into a €750.0 million (£680.9 million) term
loan facility (VM O2 Facility R) and (iii) a subsidiary of Virgin Media entered into a $1,300.0 million (£1,006.9 million) term
loan facility (VM O2 Facility Q, and together with VM O2 Facility P and VM O2 Facility R, the VM O2 Facilities). The additional
facility accession agreement in relation to VM O2 Facility P is expected to be signed during the fourth quarter of 2020. VM O2
Facility P will be issued at par, mature on January 31, 2026 and bear interest at a rate of LIBOR +2.75%. VM O2 Facility R will
be issued at 99.0% of par, mature on January 31, 2029 and bear interest at a rate of EURIBOR +3.25%, subject to a EURIBOR
floor of 0.0%. VM O2 Facility Q will be issued at 98.5% of par, mature on January 31, 2029 and bear interest at a rate of LIBOR
+3.25%, subject to a LIBOR floor of 0.0%.
At September 30, 2020, the VM O2 Facilities were undrawn and are only available to be drawn and utilized upon consummation
of the U.K. JV. Accordingly, our unused borrowing capacity at September 30, 2020 excludes the availability under the VM O2
Facilities, as applicable. In the event that the formation of the U.K. JV is not successfully completed, the VM O2 Facilities will
be cancelled.
Senior Secured Notes Transactions. In addition to the facility transactions described above, certain of the U.K. JV Entities
outside of Virgin Media issued (i) $1,350.0 million (£1,045.6 million) principal amount of U.S. dollar-denominated senior secured
notes (the 2031 VM O2 Dollar Senior Secured Notes), (ii) €950.0 million (£862.5 million) principal amount of euro-denominated
senior secured notes (the 2031 VM O2 Euro Senior Secured Notes) and (iii) £600.0 million principal amount of sterling-
denominated senior secured notes (the 2029 VM O2 Sterling Senior Secured Notes, and together with the 2031 VM O2 Dollar
Senior Secured Notes and the 2031 VM O2 Euro Senior Secured Notes, the VM O2 Notes). The 2031 VM O2 Dollar Senior
Secured Notes and 2031 VM O2 Euro Senior Secured Notes were each issued at par, mature on January 31, 2031 and bear interest
at a rate of 4.25% and 3.25%, respectively. The 2029 VM O2 Sterling Senior Secured Notes were issued at par, mature on January 31,
2029 and bear interest at a rate of 4.0%. The VM O2 Notes are not currently obligations of Virgin Media. Upon formation of the
U.K. JV, the proceeds from the issuance of the VM O2 Notes will be used to fund certain facility loans under the existing Virgin
Media credit facility agreement to the New VM Credit Facility Borrower. The New VM Credit Facility Borrower will use such
loan proceeds, together with the proceeds from the VM O2 Facilities, for the purpose of (a) funding a dividend, distribution or
other payment to VMED O2 UK Limited (which, upon formation of the U.K. JV, will become the ultimate parent company of the
U.K. JV), and ultimately to Liberty Global and Telefonica, and (b) paying fees and expenses related to the formation of the U.K.
JV
If the formation of the U.K. JV is not consummated on or before May 7, 2022 (the Long Stop Date) or, if the Long Stop Date
is postponed in accordance with the terms of the agreement, on or before November 7, 2022, or upon the occurrence of certain
other events, the VM O2 Notes will be redeemed at a redemption price equal to 100% of the principal amount of the applicable
VM O2 Notes plus accrued and unpaid interest and additional amounts, if any, up to but excluding the date of the redemption.
VIRGIN MEDIA INC.
Notes to Condensed Consolidated Financial Statements — (Continued)
September 30, 2020
(unaudited)
24
Maturities of Debt
The pound sterling equivalents of the maturities of our debt as of September 30, 2020 are presented below:
Third-partydebt
Related-party debt Total
in millions
Year ending December 31:
2020 (remainder of year) ........................................................................................ £ 513.0 £ — £ 513.0
2021 ........................................................................................................................ 1,366.8 232.1 1,598.9
2022 ........................................................................................................................ 27.2 — 27.2
2023 ........................................................................................................................ 319.7 — 319.7
2024 ........................................................................................................................ 26.0 — 26.0
2025 ........................................................................................................................ 469.1 — 469.1
Thereafter................................................................................................................ 9,366.7 — 9,366.7
Total debt maturities (a) ........................................................................................ 12,088.5 232.1 12,320.6
Deferred financing costs, discounts and premiums, net............................................ (21.7) — (21.7)
Total ...................................................................................................................... £ 12,066.8 £ 232.1 £ 12,298.9
Current portion .......................................................................................................... £ 1,868.9 £ — £ 1,868.9
Noncurrent portion .................................................................................................... £ 10,197.9 £ 232.1 £ 10,430.0
_______________
(a) Amounts include vendor financing obligations of £1,938.1 million, as set forth below (in millions):
Year ending December 31:
2020 (remainder of year).......................................................................................................................... £ 490.2
2021.......................................................................................................................................................... 1,366.8
2022.......................................................................................................................................................... 27.2
2023.......................................................................................................................................................... 26.6
2024.......................................................................................................................................................... 23.3
2025.......................................................................................................................................................... 4.0
Total vendor financing maturities (1) .................................................................................................... £ 1,938.1
Current portion............................................................................................................................................ £ 1,846.1
Noncurrent portion...................................................................................................................................... £ 92.0
_______________
(1) The 2020 VM Financing Companies have issued an aggregate £1,287.3 million equivalent in notes maturing in July 2028.
The net proceeds from these notes are used by the 2020 VM Financing Companies to purchase from various third parties
certain vendor financed receivables owed by our company. To the extent that the proceeds from these notes exceed the
amount of vendor financed receivables available to be purchased, the excess proceeds are used to fund an excess cash
facility under our credit facility. The 2020 VM Financing Companies can request the excess cash facility be repaid by
our company as additional vendor financed receivables become available for purchase.
VIRGIN MEDIA INC.
Notes to Condensed Consolidated Financial Statements — (Continued)
September 30, 2020
(unaudited)
25
(8) Leases
General
We enter into operating and finance leases for network equipment, real estate and vehicles. We provide residual value guarantees
on certain of our vehicle leases.
Lease Balances
A summary of our right-of-use (ROU) assets and lease liabilities is set forth below:
September 30,2020
December 31,2019
in millions
ROU assets:
Operating leases (a) .................................................................................................................. £ 135.7 £ 144.2
Finance leases (b) ..................................................................................................................... 43.6 49.4
Total ROU assets.................................................................................................................... £ 179.3 £ 193.6
Lease liabilities:
Operating leases (c) .................................................................................................................. £ 150.1 £ 157.6
Finance leases (d) ..................................................................................................................... 49.1 52.9
Total lease liabilities............................................................................................................... £ 199.2 £ 210.5
_______________
(a) Our operating lease ROU assets are included in other assets, net, on our condensed consolidated balance sheets. At
September 30, 2020, the weighted average remaining lease term for operating leases was 8.4 years and the weighted average
discount rate was 4.4%. During the nine months ended September 30, 2020 and 2019, we recorded non-cash additions to our
operating lease ROU assets of £19.0 million and £36.3 million, respectively.
(b) Our finance lease ROU assets are included in property and equipment, net, on our condensed consolidated balance sheets. At
September 30, 2020, the weighted average remaining lease term for finance leases was 28.9 years and the weighted average
discount rate was 6.8%. During the nine months ended September 30, 2020 and 2019, we recorded non-cash additions to our
finance lease ROU assets of nil and £5.4 million, respectively.
(c) The current and long-term portions of our operating lease liabilities are included within other current liabilities and other long-
term liabilities, respectively, on our condensed consolidated balance sheets.
(d) The current and long-term portions of our finance lease liabilities are included within current portion of debt and finance lease
obligations and long-term debt and finance lease obligations, respectively, on our condensed consolidated balance sheets.
VIRGIN MEDIA INC.
Notes to Condensed Consolidated Financial Statements — (Continued)
September 30, 2020
(unaudited)
26
A summary of our aggregate lease expense is set forth below:
Three months ended
September 30,Nine months ended
September 30,
2020 2019 2020 2019
in millions
Total lease expense:
Finance lease expense:
Depreciation and amortization ................................................................ £ 1.6 £ 2.3 £ 5.3 £ 6.3
Interest expense....................................................................................... 0.9 1.0 2.9 3.1
Total finance lease expense.................................................................. 2.5 3.3 8.2 9.4
Operating lease expense (a)....................................................................... 11.1 9.7 31.1 28.3
Total lease expense ............................................................................ £ 13.6 £ 13.0 £ 39.3 £ 37.7
_______________
(a) Our operating lease expense is included in other operating expenses, SG&A expenses and impairment, restructuring and other
operating items, net, in our condensed consolidated statements of operations.
A summary of our cash outflows from operating and finance leases is set forth below:
Nine months ended
September 30,
2020 2019
in millions
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash outflows from operating leases............................................................................... £ 30.2 £ 29.7
Operating cash outflows from finance leases .................................................................................. 2.9 3.1
Financing cash outflows from finance leases .................................................................................. 3.8 5.2
Total cash outflows from operating and finance leases ................................................................ £ 36.9 £ 38.0
VIRGIN MEDIA INC.
Notes to Condensed Consolidated Financial Statements — (Continued)
September 30, 2020
(unaudited)
27
Maturities of our operating and finance lease liabilities as of September 30, 2020 are presented below. Amounts represent the
pound sterling equivalents based on September 30, 2020 exchange rates:
Operatingleases
Financeleases
in millions
Year ending December 31:
2020 (remainder of year)................................................................................................................. £ 9.0 £ 2.0
2021................................................................................................................................................. 33.9 7.8
2022................................................................................................................................................. 28.3 9.7
2023................................................................................................................................................. 25.0 7.3
2024................................................................................................................................................. 20.7 3.5
2025................................................................................................................................................. 11.0 3.5
Thereafter ........................................................................................................................................ 50.7 131.8
Total payments.............................................................................................................................. 178.6 165.6
Less: present value discount .............................................................................................................. (28.5) (116.5)
Present value of lease payments ................................................................................................... £ 150.1 £ 49.1
Current portion .................................................................................................................................. £ 28.7 £ 4.0
Noncurrent portion ............................................................................................................................ £ 121.4 £ 45.1
(9) Income Taxes
Virgin Media files its primary income tax return in the U.S. Our subsidiaries file income tax returns in the U.S., the U.K. and
Ireland. The income taxes of Virgin Media and its subsidiaries are presented on a separate return basis for each tax-paying entity
or group.
Certain of our U.K. subsidiaries are within the same U.K. tax group as our ultimate parent company, Liberty Global, and its
U.K. subsidiaries. U.K. tax law permits the surrendering, without cash payment, of tax losses between entities within the same tax
group. Tax losses with an aggregate tax effect of £4.9 million and £12.0 million during the three months ended September 30,
2020 and 2019, respectively, and £31.9 million during the nine months ended September 30, 2019, were surrendered by Liberty
Global and its U.K. subsidiaries outside of Virgin Media to our U.K. tax subsidiaries. During the nine months ended September
30, 2020, tax losses with an aggregate tax effect of £29.4 million were surrendered to Liberty Global and its U.K. subsidiaries
outside Virgin Media by our U.K. subsidiaries. These surrendered tax assets are reflected as changes to additional paid-in capital
in our condensed consolidated statements of owners’ equity.
VIRGIN MEDIA INC.
Notes to Condensed Consolidated Financial Statements — (Continued)
September 30, 2020
(unaudited)
28
Income tax benefit (expense) attributable to our loss before income taxes differs from the amounts computed using
the U.S. federal income tax rate of 21.0% for the three and nine months ended September 30, 2020 and 2019 as a result of the
following factors:
Three months ended Nine months ended
September 30, September 30,
2020 2019 2020 2019
in millions
Computed “expected” tax benefit ........................................................ £ 3.9 £ 9.9 £ 32.0 £ 46.0
Enacted tax law and rate change (a) .................................................... 180.9 3.0 182.5 (3.5)
Non-deductible or non-taxable interest and other expenses (b)........... 25.8 (0.2) 23.7 (1.3)
International rate differences (c) .......................................................... (0.5) (1.4) (6.6) (6.8)
Basis and other differences in the treatment of items associated withinvestments in subsidiaries (d) ......................................................... (2.2) (10.3) (5.1) (23.2)
Change in valuation allowances........................................................... (1.7) (0.7) (3.8) (3.5)
Other, net.............................................................................................. 3.0 (2.1) (0.7) (2.6)
Total income tax benefit (expense).................................................... £ 209.2 £ (1.8) £ 222.0 £ 5.1
_______________
(a) On July 22, 2020, legislation was enacted in the U.K. to maintain the corporate income tax rate at 19.0%, reversing previous
legislation that had reduced the U.K. rate to 17.0% from April 1, 2020. The impact of this rate change on our deferred
balances was recorded during the third quarter of 2020.
(b) The 2020 amounts include the impact of a technology-related transfer pricing transition fee, as further described in note
10.
(c) Amounts reflect statutory rates in the U.K. and Ireland, which are lower than the U.S. federal income tax rate.
(d) These amounts reflect the net impact of differences in the treatment of income and loss items between financial reporting
and tax accounting related to investments in subsidiaries and affiliates including the effects of foreign earnings.
VIRGIN MEDIA INC.
Notes to Condensed Consolidated Financial Statements — (Continued)
September 30, 2020
(unaudited)
29
(10) Related-party Transactions
Our related-party transactions consist of the following:
Three months ended Nine months ended
September 30, September 30,
2020 2019 (a) 2020 2019 (a)
in millions
Charges included in:
Programming and other direct costs of services..................................... £ (3.6) £ (7.8) £ (5.9) £ (13.8)
Other operating....................................................................................... (6.0) (6.9) (16.4) (19.3)
SG&A..................................................................................................... (1.1) (1.8) (4.2) (4.6)
Allocated share-based compensation expense.......................................... (11.6) (10.4) (33.0) (35.7)
Fees and allocations, net:
Operating and SG&A (exclusive of depreciation and share-basedcompensation)..................................................................................... (6.7) (5.1) (17.6) (10.9)
Depreciation ........................................................................................... (36.4) (19.2) (89.3) (48.0)
Share-based compensation ..................................................................... (34.7) (23.3) (73.4) (49.2)
Management fee ..................................................................................... (18.0) (18.0) (67.9) (36.0)
Total fees and allocations, net............................................................... (95.8) (65.6) (248.2) (144.1)
Included in operating income............................................................. (118.1) (92.5) (307.7) (217.5)
Interest expense ........................................................................................ (0.6) (0.4) (1.7) (1.5)
Interest income.......................................................................................... 61.0 71.3 187.9 213.2
Realized and unrealized losses on derivative instruments, net................. — — — (0.9)
Included in net earnings (loss) ............................................................. £ (57.7) £ (21.6) £ (121.5) £ (6.7)
Property and equipment transfers in (out), net ......................................... £ 1.2 £ (2.4) £ 2.9 £ (9.0)
_______________
(a) During the fourth quarter of 2019, Liberty Global changed its segment presentation of certain costs related to its centrally-
managed technology and innovation function as a result of internal changes with respect to the way in which its chief operating
decision maker evaluates the performance of its operating segments. These costs, which were previously charged to our
company and reflected within the applicable categories of our fees and allocations, net, are now allocated (the T&I Allocation)
to our company and reflected within (i) other operating expenses and (ii) SG&A expenses in our consolidated financial
statements. Amounts presented for the three and nine months ended September 30, 2019 have been revised to reflect this
change.
The following table provides a summary of the impact that resulted from the T&I Allocation:
Three months ended Nine months ended
September 30, September 30,
2020 2019 2020 2019
in millions
Increase (decrease) to charges included in:
Other operating expenses ................................................................. £ 6.2 £ 8.1 £ 17.6 £ 22.4
SG&A expenses................................................................................ 4.1 5.1 12.0 15.5
Fees and allocations, net:
Operating and SG&A..................................................................... (9.6) (7.9) (25.0) (19.4)
Management fee............................................................................. (0.7) (5.3) (4.6) (18.5)
Total impact on operating income ............................................... £ — £ — £ — £ —
VIRGIN MEDIA INC.
Notes to Condensed Consolidated Financial Statements — (Continued)
September 30, 2020
(unaudited)
30
General. Virgin Media charges fees and allocates costs and expenses to certain other Liberty Global subsidiaries and certain
Liberty Global subsidiaries outside of Virgin Media charge fees and allocate costs and expenses to Virgin Media. Depending on
the nature of these related-party transactions, the amount of the charges or allocations may be based on (i) our estimated share of
the underlying costs, (ii) our estimated share of the underlying costs plus a mark-up or (iii) commercially-negotiated rates. The
methodology Liberty Global uses to allocate its central and administrative costs to its borrowing groups impacts the calculation
of the “EBITDA” metric specified by our debt agreements (Covenant EBITDA). In this regard, the components of related-party
fees and allocations that are deducted to arrive at our Covenant EBITDA are based on (a) the amount and nature of costs incurred
by the allocating Liberty Global subsidiaries during the period, (b) the allocation methodologies in effect during the period and
(c) the size of the overall pool of entities that are charged fees and allocated costs, such that changes in any of these factors would
likely result in changes to the amount of related-party fees and allocations that will be deducted to arrive at our Covenant EBITDA
in future periods. For example, to the extent that a Liberty Global subsidiary borrowing group was to acquire (sell) an operating
entity, and assuming no change in the total costs incurred by the allocating entities, the fees charged and the costs allocated to our
company would decrease (increase). Although we believe that the related-party charges and allocations described below are
reasonable, no assurance can be given that the related-party costs and expenses reflected in our condensed consolidated statements
of operations are reflective of the costs that we would incur on a standalone basis. Our related-party transactions are generally
cash settled unless otherwise noted below.
Programming and other direct costs of services. Amounts primarily consist of interconnect, roaming, lease and access fees
and other services provided to our company by other Liberty Global subsidiaries.
Other operating expenses. Amounts consist of the net effect of (i) charges of £7.3 million and £8.5 million during the three
months ended September 30, 2020 and 2019, respectively, and £20.1 million and £23.4 million during the nine months ended
September 30, 2020 and 2019, respectively, for network and technology services provided to our company by other Liberty Global
subsidiaries, including costs related to the T&I Allocation, and (ii) recharges of £1.3 million and £1.6 million during the three
months ended September 30, 2020 and 2019, respectively, and £3.7 million and £4.1 million during the nine months ended
September 30, 2020 and 2019, respectively, for network and technology services provided by our company to other Liberty Global
subsidiaries.
SG&A expenses. Amounts consist of the net effect of (i) charges of £4.9 million and £5.9 million during the three months
ended September 30, 2020 and 2019, respectively, and £15.8 million and £16.8 million during the nine months ended September
30, 2020 and 2019, respectively, primarily related to the T&I Allocation, and (ii) recharges of £3.8 million and £4.1 million during
the three months ended September 30, 2020 and 2019, respectively, and £11.6 million and £12.2 million during the nine months
ended September 30, 2020 and 2019, respectively, primarily related to support function staffing and other services provided by
our company to another Liberty Global subsidiary.
Allocated share-based compensation expense. Amounts are allocated to our company by Liberty Global and represent share-
based compensation expense associated with the Liberty Global share-based incentive awards held by certain employees of our
subsidiaries. Share-based compensation expense is included in SG&A expense in our condensed consolidated statements of
operations.
Fees and allocations, net. These amounts, which are based on our company’s estimated share of the applicable costs (including
personnel-related and other costs associated with the services provided) incurred by Liberty Global subsidiaries, represent the
aggregate net effect of charges between subsidiaries of Virgin Media and various Liberty Global subsidiaries that are outside of
Virgin Media. These charges generally relate to management, finance, legal, and other services that support our company’s
operations. The categories of our fees and allocations, net, are as follows:
• Operating and SG&A (exclusive of depreciation and share-based compensation). The amounts included in this category,
which are generally loan settled, represent our estimated share of certain centralized management, marketing, finance
and other operating and SG&A expenses of Liberty Global’s subsidiaries, whose activities benefit multiple operations,
including operations within and outside of our company. The amounts allocated represent our estimated share of the actual
costs incurred by Liberty Global’s subsidiaries, without a mark-up. Amounts in this category are generally deducted to
arrive at our Covenant EBITDA.
VIRGIN MEDIA INC.
Notes to Condensed Consolidated Financial Statements — (Continued)
September 30, 2020
(unaudited)
31
• Depreciation. The amounts included in this category, which are generally loan settled, represent our estimated share of
depreciation of assets not owned by our company. The amounts allocated represent our estimated share of the actual costs
incurred by Liberty Global’s subsidiaries, without a mark-up.
• Share-based compensation. The amounts included in this category, which are generally loan settled, represent our estimated
share of share-based compensation associated with Liberty Global employees who are not employees of our company.
The amounts allocated represent our estimated share of the actual costs incurred by Liberty Global’s subsidiaries, without
a mark-up.
• Management fee. The amounts included in this category, which are generally loan settled, represent our estimated allocable
share of (i) operating and SG&A expenses related to stewardship services provided by certain Liberty Global subsidiaries
and (ii) the mark-up, if any, applicable to each category of the related-party fees and allocations charged to our company.
Liberty Global charges technology-based costs to our company. Prior to July 1, 2020, such charges were calculated using a
royalty-based method (the Royalty-based Method). To the extent that our proportional share of the technology-based costs was
more than the actual amounts charged under the Royalty-based Method, such excess amounts were reflected as deemed contributions
of technology-related services in our consolidated statements of owners’ equity. Under the Royalty-based Method, any excess
amounts we were charged that exceeded our proportional share of the technology-based costs were classified as management fees
and were added back to arrive at Covenant EBITDA.
During the three months ended September 30, 2019, our proportional share of the technology-based costs was £2.4 million
more than the actual amount charged under the Royalty-based Method. During the six months ended June 30, 2020 and the nine
months ended September 30, 2019, our proportional share of the technology-based costs was £9.7 million and £5.1 million more
than the actual amount charged under the Royalty-based Method, respectively. During the three months ended September 30, 2020,
we recorded a £6.0 million adjustment to the excess amounts that were reflected as deemed contributions of technology-related
services in our condensed consolidated statement of owners’ equity for the first six months of 2020.
Effective July 1, 2020, the Royalty-based Method was terminated and replaced with a new method whereby the technology-
based costs charged by Liberty Global to our company are now based on our estimated share of the underlying costs plus a mark-
up (the Cost Plus Method). The portion of the charge representing the mark-up is recorded as an equity transaction and reflected
as a capital charge for technology-related services in our consolidated statements of owners’ equity (£3.9 million for the three
months ended September 30, 2020). In addition, in connection with the July 1, 2020 change to the Cost Plus Method, we were
charged a one-time transfer pricing transition fee of £143.6 million, which is recorded as an equity transaction in our condensed
consolidated statement of owners’ equity for the three months ended September 30, 2020.
Interest expense. Amounts represent interest expense on long-term related-party debt, as further described below.
Interest income. Amounts represent interest income on long-term related-party notes receivable, as further described below.
Realized and unrealized losses on derivative instruments, net. These amounts relate to related-party foreign currency forward
contracts with Liberty Global Europe Financing BV (LGE Financing), a subsidiary of Liberty Global, which were settled during
the second quarter of 2019.
Property and equipment transfers, net. These amounts, which are generally cash settled, include the net carrying values of (i)
construction in progress, including certain capitalized labor, transferred to or acquired from other Liberty Global subsidiaries, (ii)
customer premises equipment acquired from other Liberty Global subsidiaries, which centrally procure equipment on behalf of
our company and various other Liberty Global subsidiaries, and (iii) used equipment transferred to or acquired from other Liberty
Global subsidiaries outside of Virgin Media.
VIRGIN MEDIA INC.
Notes to Condensed Consolidated Financial Statements — (Continued)
September 30, 2020
(unaudited)
32
The following table provides details of our related-party balances:
September 30, 2020 December 31, 2019
in millions
Current receivables (a)................................................................................................. £ 12.6 £ 34.8
Long-term notes receivable (b).................................................................................... 5,051.0 4,963.6
Total related-party assets ........................................................................................... £ 5,063.6 £ 4,998.4
Accounts payable ......................................................................................................... £ 10.0 £ 7.2
Accrued capital expenditures (c) ................................................................................. 0.2 7.6
Other current liabilities (d)........................................................................................... 183.4 36.4
Long-term related-party debt (e).................................................................................. 232.1 56.7
Other long-term liabilities............................................................................................ — 0.7
Total related-party liabilities...................................................................................... £ 425.7 £ 108.6
_______________
(a) Amounts represent (i) accrued interest on long-term notes receivable from LG Europe 2, including £1.9 million and £27.0
million, respectively, owed to Virgin Media Finco Limited (Virgin Media Finco), and (ii) certain receivables from other
Liberty Global subsidiaries arising in the normal course of business.
(b) Amounts primarily represent:
(i) a note receivable from LG Europe 2 that is owed to Virgin Media Finco. At September 30, 2020 and December 31,
2019, the principal amount outstanding under this note was £5,004.2 million and £3,425.0 million, respectively.
The increase during the nine months ended September 30, 2020 relates to (i) £4,039.2 million of cash advances,
(ii) £2,254.2 million of cash repayments and (iii) £205.8 million of other non-cash settlements. The decrease during
the nine months ended September 30, 2019 relates to (i) £3,601.8 million of cash advances, (ii) £3,569.1 million
of cash repayments and (iii) £208.4 million of other non-cash settlements. Pursuant to the agreement, the maturity
date is July 16, 2023, however Virgin Media Finco may agree to advance additional amounts to LG Europe 2 at
any time and LG Europe 2 may, with agreement from Virgin Media Finco, repay all or part of the outstanding
principal at any time prior to the maturity date. The interest rate on this note, which is subject to adjustment, was
4.741% as of September 30, 2020, and the accrued interest on this note receivable may be cash settled on the last
day of each month and on the date of each full or partial repayment of the note receivable or, if mutually agreed,
loan settled; and
(ii) a note receivable from LG Europe 2 that was owed to Virgin Media Finco. This note matures on April 15, 2023
and bears interest at a rate of 8.50%. At September 30, 2020 and December 31, 2019, the principal amount
outstanding under this note was nil and £1,501.5 million, respectively. The decrease during the nine months ended
September 30, 2020 relates to (i) £1,428.9 million of cash repayments and (ii) £72.6 million of other non-cash
settlements. The outstanding balance of this note receivable was cash settled during the second quarter of 2020.
(c) Amounts represent accrued capital expenditures for property and equipment transferred to our company from other Liberty
Global subsidiaries.
(d) Amounts primarily represent (i) certain payables to other Liberty Global subsidiaries arising in the normal course of business
and (ii) unpaid capital charges from Liberty Global, as described below, which are settled periodically. None of these
payables are interest bearing. The September 30, 2020 amount also includes a one-time transfer pricing transition fee related
to the change in Liberty Global’s methodology for charging technology-based fees to our company, as described above.
VIRGIN MEDIA INC.
Notes to Condensed Consolidated Financial Statements — (Continued)
September 30, 2020
(unaudited)
33
(e) Amounts represent a note payable from Virgin Media Mobile Finance Limited to LG Europe 2, which matures on December
18, 2021 and bears interest at a rate of 3.930%. The increase during the nine months ended September 30, 2020 relates to
(i) £189.0 million of cash borrowings, (ii) £14.4 million of cash repayments and (ii) £0.8 million of non-cash accrued interest
to the loan balance. The decrease during the nine months ended September 30, 2019 primarily relates to (i) £19.4 million
of cash repayments, (ii) £7.5 million of cash borrowings and (iii) £0.4 million of non-cash accrued interest to the loan
balance. Accrued interest may be, as agreed to by our company and LG Europe 2, (a) transferred to the loan balance annually
on January 1 or (b) repaid on the last day of each month and on the date of principal repayments.
We recorded capital charges of $2.1 million (£1.7 million at the applicable rate) and $4.6 million (£3.7 million at the applicable
rate) during the three months ended September 30, 2020 and 2019, respectively, and $10.3 million (£8.2 million at the applicable
rate) and $18.2 million (£14.3 million at the applicable rate) during the nine months ended September 30, 2020 and 2019,
respectively, in our condensed consolidated statements of owners’ equity in connection with the exercise of Liberty Global share
appreciation rights and options and the vesting of Liberty Global restricted share units and performance-based restricted share
units held by employees of our subsidiaries. We and Liberty Global have agreed that these capital charges will be based on the
fair value of the underlying Liberty Global ordinary shares associated with share-based incentive awards that vest or are exercised
during the period, subject to any reduction that is necessary to ensure that the cumulative capital charge does not exceed the
cumulative amount of share-based compensation expense recorded by our company with respect to Liberty Global share-based
incentive awards.
Tax losses with an aggregate tax effect of £4.9 million and £12.0 million during the three months ended September 30, 2020
and 2019, respectively, and £31.9 million during the nine months ended September 30, 2019, were surrendered by Liberty Global
and its U.K. subsidiaries outside of Virgin Media to our U.K. tax subsidiaries. During the nine months ended September 30, 2020,
tax losses with an aggregate tax effect of £29.4 million were surrendered to Liberty Global and its U.K. subsidiaries outside Virgin
Media by our U.K. subsidiaries. For additional information, see note 9.
Our parent company, Virgin Media and certain Liberty Global subsidiaries are co-guarantors of the indebtedness of certain
other Liberty Global subsidiaries. We do not believe these guarantees will result in material payments in the future.
(11) Commitments and Contingencies
Commitments
In the normal course of business, we have entered into agreements that commit our company to make cash payments in future
periods with respect to programming contracts, network and connectivity commitments, purchases of customer premises and other
equipment and services and other items. The following table sets forth the pound sterling equivalents of such commitments as of
September 30, 2020. The commitments included in this table do not reflect any liabilities that are included on our September 30,
2020 condensed consolidated balance sheet.
Payments due during:
Remainderof 2020 2021 2022 2023 2024 2025 Thereafter Total
in millions
Programming commitments ........ £ 187.1 £ 600.6 £ 244.0 £ 11.6 £ 11.3 £ 11.2 £ 13.1 £ 1,078.9
Network and connectivitycommitments............................ 175.7 277.6 53.4 11.3 4.2 2.9 12.6 537.7
Purchase commitments................ 122.3 102.5 12.8 1.7 0.1 0.1 — 239.5
Other commitments ..................... 4.8 9.7 1.5 — — — — 16.0
Total........................................... £ 489.9 £ 990.4 £ 311.7 £ 24.6 £ 15.6 £ 14.2 £ 25.7 £ 1,872.1
Programming commitments consist of obligations associated with certain of our programming contracts that are enforceable
and legally binding on us as we have agreed to pay minimum fees without regard to (i) the actual number of subscribers to the
programming services or (ii) whether we terminate service to a portion of our subscribers or dispose of a portion of our distribution
systems. Programming commitments do not include increases in future periods associated with contractual inflation or other price
adjustments that are not fixed. Accordingly, the amounts reflected in the above table with respect to these contracts are significantly
VIRGIN MEDIA INC.
Notes to Condensed Consolidated Financial Statements — (Continued)
September 30, 2020
(unaudited)
34
less than the amounts we expect to pay in these periods under these contracts. Historically, payments to programming vendors
have represented a significant portion of our operating costs, and we expect this will continue to be the case in future periods. In
this regard, our total programming and copyright costs aggregated £663.0 million and £686.2 million during the nine months ended
September 30, 2020 and 2019, respectively.
Programming costs primarily relate to agreements to distribute channels to our customers. Our channel distribution agreements
are generally multi-year contracts for which we are charged either (i) variable rates based upon the number of subscribers or (ii)
on a flat fee basis. Certain of our variable rate contracts require minimum guarantees. Programming costs under such arrangements
are recorded in operating costs and expenses in our condensed consolidated statement of operations when the programming is
available for viewing.
Network and connectivity commitments include (i) service commitments associated with the network extension program in
the U.K. and Ireland (the Network Extension) and (ii) commitments associated with our mobile virtual network operator (MVNO)
agreements. The amounts reflected in the above table with respect to certain of our MVNO commitments represent fixed minimum
amounts payable under these agreements and, therefore, may be significantly less than the actual amounts we ultimately pay in
these periods. In November 2019, we entered into a new five-year MVNO agreement that will replace our existing MVNO agreement
in 2021.
Purchase commitments include unconditional and legally binding obligations related to (i) the purchase of customer premises
and other equipment and (ii) certain service-related commitments, including call center, information technology and maintenance
services.
In addition to the commitments set forth in the table above, we have significant commitments under (i) derivative instruments
and (ii) defined benefit plans and similar agreements, pursuant to which we expect to make payments in future periods. For
information regarding our derivative instruments, including the net cash paid or received in connection with these instruments
during the nine months ended September 30, 2020 and 2019, see note 4.
Guarantees and Other Credit Enhancements
In the ordinary course of business, we may provide (i) indemnifications to our lenders, our vendors and certain other parties,
(ii) performance and/or financial guarantees to local municipalities, our customers and vendors and (iii) guarantees as a co-guarantor
with certain other Liberty Global subsidiaries related to various financing arrangements. Historically, these arrangements have not
resulted in our company making any material payments and we do not believe that they will result in material payments in the
future.
Legal and Regulatory Proceedings and Other Contingencies
VAT Matters. Our application of VAT with respect to certain revenue generating activities has been challenged by the U.K.
tax authorities (HMRC). HMRC claimed that amounts charged to certain customers for payment handling services are subject to
VAT, while we took the position that such charges were exempt from VAT under existing law. At the time of HMRC’s initial
challenge in 2009, we remitted all related VAT amounts claimed by HMRC, and continued to make such VAT payments pending
a ruling on our appeal to the First Tier Tribunal. As the likelihood of loss was not considered probable and we believed that the
amounts paid would be recoverable, such amounts were recorded as a receivable on our consolidated balance sheet. In January
2020, the First Tier Tribunal rejected our appeal and ruled in favor of HMRC. Accordingly, during the fourth quarter of 2019, we
recorded a net provision for litigation of £41.3 million. We have been granted permission to appeal the case to the Upper Tribunal,
with the appeal being stayed pending the outcome of a related case. The timing of the final outcome of the litigation remains
uncertain, although any further hearing on this matter is unlikely to occur before the third quarter of 2021.
In a separate matter, on March 19, 2014, the U.K. government announced a change in legislation with respect to the charging
of VAT in connection with prompt payment discounts such as those that we offer to our fixed-line telephony customers. This
change, which took effect on May 1, 2014, impacted our company and some of our competitors. HMRC issued a decision in the
fourth quarter of 2015 challenging our application of the prompt payment discount rules prior to the May 1, 2014 change in
legislation. We appealed this decision. As part of the appeal process, we were required to make aggregate payments of £67.0
million, comprising (i) the challenged amount of £63.7 million (which we paid during the fourth quarter of 2015) and (ii) related
interest of £3.3 million (which we paid during the first quarter of 2016). No provision was recorded by our company at that time
VIRGIN MEDIA INC.
Notes to Condensed Consolidated Financial Statements — (Continued)
September 30, 2020
(unaudited)
35
as the likelihood of loss was not considered to be probable. The aggregate amount paid does not include penalties, which could
be significant in the event that penalties were to be assessed. In September 2018, the court rejected our appeal and ruled in favor
of HMRC. Accordingly, during the third quarter of 2018, we recorded a provision for litigation of £63.7 million and related interest
expense of £3.3 million in our condensed consolidated statement of operations. The First Tier Tribunal gave permission to appeal
to the Upper Tribunal and we submitted grounds for appeal on February 22, 2019. We subsequently lost the appeal at the Upper
Tribunal and in October 2020 our request to further appeal the case was denied by the Court of Appeal; accordingly, we now
consider this matter to be closed.
Other Regulatory Matters. Video distribution, broadband internet, fixed-line telephony, mobile and content businesses are
subject to significant regulation and supervision by various regulatory bodies in the jurisdictions in which we operate, and other
U.K. and European Union (E.U.) authorities. Adverse regulatory developments could subject our businesses to a number of risks.
Regulation, including conditions imposed on us by competition or other authorities as a requirement to close acquisitions or
dispositions, could limit growth, revenue and the number and types of services offered and could lead to increased operating costs
and property and equipment additions. In addition, regulation may restrict our operations and subject them to further competitive
pressure, including pricing restrictions, interconnect and other access obligations, and restrictions or controls on content, including
content provided by third parties. Failure to comply with current or future regulation could expose our businesses to various
penalties.
Effective April 1, 2017, the rateable value of our existing network and other assets in the U.K. increased significantly. This
increase affects the amount we pay for network infrastructure charges as the annual amount payable to the U.K. government is
calculated by applying a percentage multiplier to the rateable value of assets. This change has and will continue to significantly
increase our network infrastructure charges. As compared to 2019, we expect the aggregate amount of this increase will be
approximately £16 million in 2020. Beyond 2020, we expect further but declining increases to these charges through the first
quarter of 2022. We continue to believe that these increases are excessive and retain the right of appeal should more favorable
agreements be reached with other operators. The rateable value of our network and other assets in the U.K. remains subject to
review by the U.K. government.
The U.K. Office of Communications (Ofcom) is the key regulatory authority for the communications sector in which we
operate in the U.K. Ofcom has recently issued new regulatory requirements that, effective in February 2020, obligate us to (i) alert
customers who are approaching the end of a minimum contract term to the fact that their contract period is coming to an end and
to set out the best new price that we can offer them and (ii) once a year, alert customers who are out of contract to that fact and
again confirm the best new price we can offer them. In both cases, we must also set out the price available to new customers for
an equivalent service offering. While we do not anticipate these requirements will have a material impact on our 2020 operating
results, they could have a material adverse impact in future periods.
In late February 2020, we became aware that one of our databases did not have adequate access security protection and was
accessed without permission. We immediately took remedial actions, ceased access to the database and commenced an investigation.
The information in the database did not include any individual’s passwords or financial details, such as credit card information,
or bank account numbers. We have taken steps to inform those individuals impacted and relevant regulatory authorities. The
database had information pertaining to approximately 900,000 individuals (including customers and non-customers), representing
a number that would be less than 15% of our total customer base. We do not expect this incident to have a material adverse impact
on our results of operations, cash flows or financial condition for any fiscal period and given the preliminary nature of the matter
we are unable to provide a meaningful estimate of a possible range of loss, if any.
In addition to the foregoing items, we have contingent liabilities related to matters arising in the ordinary course of business,
including (i) legal proceedings, (ii) issues involving VAT and wage, property, withholding and other tax issues and (iii) disputes
over interconnection, programming, copyright and channel carriage fees. While we generally expect that the amounts required to
satisfy these contingencies will not materially differ from any estimated amounts we have accrued, no assurance can be given that
the resolution of one or more of these contingencies will not result in a material impact on our results of operations, cash flows or
financial position in any given period. Due, in general, to the complexity of the issues involved and, in certain cases, the lack of
a clear basis for predicting outcomes, we cannot provide a meaningful range of potential losses or cash outflows that might result
from any unfavorable outcomes.
VIRGIN MEDIA INC.
Notes to Condensed Consolidated Financial Statements — (Continued)
September 30, 2020
(unaudited)
36
(12) Segment Reporting
We have one reportable segment that provides broadband internet, video, fixed-line telephony, mobile and broadcasting services
in the U.K. and Ireland.
Our revenue by major category is set forth below:
Three months ended Nine months ended
September 30, September 30,
2020 2019 2020 2019
in millions
Residential revenue:
Residential cable revenue (a):
Subscription revenue (b):
Broadband internet .............................................................................. £ 429.9 £ 418.6 £ 1,282.1 £ 1,249.9
Video ................................................................................................... 268.5 266.8 800.1 797.1
Fixed-line telephony ........................................................................... 192.3 211.0 591.9 644.9
Total subscription revenue................................................................ 890.7 896.4 2,674.1 2,691.9
Non-subscription revenue...................................................................... 17.7 13.9 44.1 43.3
Total residential cable revenue....................................................... 908.4 910.3 2,718.2 2,735.2
Residential mobile revenue (c):
Subscription revenue (b)........................................................................ 92.0 92.6 269.7 269.3
Non-subscription revenue...................................................................... 79.0 72.5 193.2 209.4
Total residential mobile revenue .................................................... 171.0 165.1 462.9 478.7
Total residential revenue .............................................................. 1,079.4 1,075.4 3,181.1 3,213.9
B2B revenue (d):
Subscription revenue................................................................................ 25.3 22.6 73.4 66.0
Non-subscription revenue ........................................................................ 175.1 167.9 500.0 507.8
Total B2B revenue ............................................................................ 200.4 190.5 573.4 573.8
Other revenue (e)........................................................................................ 11.6 15.8 37.4 48.8
Total................................................................................................ £ 1,291.4 £ 1,281.7 £ 3,791.9 £ 3,836.5
_______________
(a) Residential cable subscription revenue includes amounts received from subscribers for ongoing services and the recognition
of deferred installation revenue over the associated contract period. Residential cable non-subscription revenue includes,
among other items, channel carriage fees, late fees and revenue from the sale of equipment.
(b) Residential subscription revenue from subscribers who purchase bundled services at a discounted rate is generally allocated
proportionally to each service based on the standalone price for each individual service. As a result, changes in the standalone
pricing of our cable and mobile products or the composition of bundles can contribute to changes in our product revenue
categories from period to period.
(c) Residential mobile subscription revenue includes amounts received from subscribers for ongoing services. Residential
mobile non-subscription revenue includes, among other items, interconnect revenue and revenue from sales of mobile
handsets and other devices.
(d) B2B subscription revenue represents revenue from services to certain small or home office (SOHO) subscribers. SOHO
subscribers pay a premium price to receive expanded service levels along with broadband internet, video, fixed-line telephony
or mobile services that are the same or similar to the mass marketed products offered to our residential subscribers. B2B
non-subscription revenue includes (i) revenue from business broadband internet, video, fixed-line telephony, mobile and
VIRGIN MEDIA INC.
Notes to Condensed Consolidated Financial Statements — (Continued)
September 30, 2020
(unaudited)
37
data services offered to medium to large enterprises and, on a wholesale basis, to other operators and (ii) revenue from long-
term leases of portions of our network.
(e) Other revenue primarily includes broadcasting revenue in Ireland.
Geographic Segments
The revenue of our geographic segments is set forth below:
Three months ended Nine months ended
September 30, September 30,
2020 2019 2020 2019
in millions
U.K. ............................................................................................................ £ 1,194.1 £ 1,181.4 £ 3,505.1 £ 3,539.8
Ireland......................................................................................................... 97.3 100.3 286.8 296.7
Total......................................................................................................... £ 1,291.4 £ 1,281.7 £ 3,791.9 £ 3,836.5
VIRGIN MEDIA INC.
Notes to Condensed Consolidated Financial Statements — (Continued)
September 30, 2020
(unaudited)
38
(13) Condensed Consolidating Financial Information — Senior Notes
We present the following condensed consolidating financial information as of and for the three and nine months ended
September 30, 2020, as required by the applicable underlying indentures. For the condensed consolidating financial information
as of December 31, 2019 and for the three and nine months ended September 30, 2019, see our 2019 annual report and the
September 30, 2019 quarterly report, respectively.
As of September 30, 2020, Virgin Media Finance PLC (Virgin Media Finance) is the issuer of the following senior notes:
• $925.0 million (£716.4 million) principal amount of 2030 VM Dollar Senior Notes; and
• €500.0 million (£453.9 million) principal amount of 2030 VM Euro Senior Notes.
Our senior notes are issued by Virgin Media Finance and are guaranteed on a senior basis by Virgin Media and certain of its
subsidiaries, namely Virgin Media Group LLC (Virgin Media Group) and Virgin Media Communications Limited (Virgin Media
Communications). Each of Virgin Media Investment Holdings Limited (VMIH) and Virgin Media Investments Limited (VMIL)
have guaranteed the senior notes on a senior subordinated basis.
VIRGIN MEDIA INC.
Notes to Condensed Consolidated Financial Statements — (Continued)
September 30, 2020
(unaudited)
39
September 30, 2020
Balance sheetVirginMedia
VirginMedia
FinanceOther
guarantors VMIH VMILAll other
subsidiaries Eliminations Total
in millions
ASSETS
Current assets:
Cash and cash equivalents........... £ — £ 0.7 £ — £ — £ — £ 216.5 £ — £ 217.2
Related-party receivables ............ 0.4 — — — — 12.2 — 12.6
Other current assets:
Third-party................................ 1.3 — — 154.9 — 708.9 — 865.1
Intercompany ............................ — 9.3 — 33.1 — 16.8 (59.2) —
Total current assets................. 1.7 10.0 — 188.0 — 954.4 (59.2) 1,094.9
Property and equipment, net .......... — — — — — 5,954.8 — 5,954.8
Goodwill ........................................ — — — — — 6,020.7 — 6,020.7
Investments in, and loans to,parent and subsidiarycompanies .................................. 6,191.2 7,862.6 6,162.8 16,007.3 15,034.7 (3,275.6) (47,983.0) —
Deferred income taxes ................... — — — — — 1,739.5 — 1,739.5
Related-party notes receivable....... 10.5 — — — — 5,040.5 — 5,051.0
Other assets, net:
Third-party .................................. — — — 762.4 — 395.7 — 1,158.1
Intercompany............................... — 208.4 — 111.6 — 198.2 (518.2) —
Total assets............................. £ 6,203.4 £ 8,081.0 £ 6,162.8 £17,069.3 £15,034.7 £ 17,028.2 £ (48,560.4) £21,019.0
LIABILITIES AND OWNERS’EQUITY
Current liabilities:
Intercompany payables................ £ — £ 207.9 £ — £ 161.3 £ — £ 336.5 £ (705.7) £ —
Other current liabilities:
Third-party................................ 0.9 15.3 — 2,009.2 — 1,413.2 — 3,438.6
Intercompany and related-party ...................................... 6.4 30.9 — 26.2 — 189.3 (59.2) 193.6
Total current liabilities ........... 7.3 254.1 — 2,196.7 — 1,939.0 (764.9) 3,632.2
Long-term debt and finance leaseobligations:
Third-party................................ — 1,164.2 — 124.2 — 8,954.6 — 10,243.0
Related-party ............................ — — — — — 232.1 — 232.1
Other long-term liabilities:
Third-party ................................ 28.1 — — 549.9 — 178.4 — 756.4
Intercompany and related- party........................................ — 67.7 — 406.6 — 43.9 (518.2) —
Total liabilities ....................... 35.4 1,486.0 — 3,277.4 — 11,348.0 (1,283.1) 14,863.7
Total parent’s equity ............ 6,168.0 6,595.0 6,162.8 13,791.9 15,034.7 5,692.9 (47,277.3) 6,168.0
Noncontrolling interest .................. — — — — — (12.7) — (12.7)
Total owners’ equity............... 6,168.0 6,595.0 6,162.8 13,791.9 15,034.7 5,680.2 (47,277.3) 6,155.3
Total liabilities and owners’equity............................... £ 6,203.4 £ 8,081.0 £ 6,162.8 £17,069.3 £15,034.7 £ 17,028.2 £ (48,560.4) £21,019.0
VIRGIN MEDIA INC.
Notes to Condensed Consolidated Financial Statements — (Continued)
September 30, 2020
(unaudited)
40
Three months ended September 30, 2020
Statement of operationsVirginMedia
VirginMedia
FinanceOther
guarantors VMIH VMILAll other
subsidiaries Eliminations Total
in millions
Revenue ................................................... £ — £ — £ — £ — £ — £ 1,291.4 £ — £ 1,291.4
Operating costs and expenses (exclusiveof depreciation and amortization,shown separately below):
Programming and other direct costs ofservices.............................................. — — — — — 396.3 — 396.3
Other operating ..................................... — — — — — 213.9 — 213.9
SG&A.................................................... 0.3 — — — — 183.8 — 184.1
Related-party fees and allocations,net...................................................... — — — — — 95.8 — 95.8
Depreciation and amortization .............. — — — — — 334.4 — 334.4
Impairment, restructuring and otheroperating items, net ........................... — — — — — 7.0 — 7.0
0.3 — — — — 1,231.2 — 1,231.5
Operating income (loss) ..................... (0.3) — — — — 60.2 — 59.9
Non-operating income (expense):
Interest expense:
Third-party .......................................... — (13.3) — (25.0) — (97.2) — (135.5)
Intercompany and related-party .......... — (87.4) — (58.3) — (149.2) 294.3 (0.6)
Interest income – related-party andintercompany..................................... 0.2 22.3 — 47.3 — 285.5 (294.3) 61.0
Realized and unrealized gains (losses)on derivative instruments, net:
Third-party ........................................ — — — (254.8) — (0.2) — (255.0)
Intercompany .................................... — (153.3) — 239.8 — (86.5) — —
Foreign currency transaction gains, net 7.4 146.3 — 28.6 — 71.3 — 253.6
Realized and unrealized gains due tochanges in fair values of certaindebt, net............................................. — — — 0.8 — — — 0.8
Losses on debt extinguishment, net ...... — — — — — (0.1) — (0.1)
Other expense, net................................. — (0.1) — — — (2.8) — (2.9)
7.6 (85.5) — (21.6) — 20.8 — (78.7)
Earnings (loss) before income taxes... 7.3 (85.5) — (21.6) — 81.0 — (18.8)
Income tax benefit (expense)................... (1.0) — — — — 210.2 — 209.2
Earnings (loss) after income taxes...... 6.3 (85.5) — (21.6) — 291.2 — 190.4
Equity in net earnings of subsidiaries...... 182.1 286.0 200.4 307.5 296.1 — (1,272.1) —
Net earnings........................................ 188.4 200.5 200.4 285.9 296.1 291.2 (1,272.1) 190.4
Net earnings attributable tononcontrolling interest ......................... — — — — — (2.0) — (2.0)
Net earnings attributable to parent ........ £ 188.4 £ 200.5 £ 200.4 £ 285.9 £ 296.1 £ 289.2 £ (1,272.1) £ 188.4
Total comprehensive earnings............... £ 178.5 £ 200.1 £ 200.0 £ 285.5 £ 295.7 £ 290.8 £ (1,270.1) £ 180.5
Comprehensive earnings attributable tononcontrolling interest ......................... — — — — — (2.0) — (2.0)
Comprehensive earnings attributable toparent................................................. £ 178.5 £ 200.1 £ 200.0 £ 285.5 £ 295.7 £ 288.8 £ (1,270.1) £ 178.5
VIRGIN MEDIA INC.
Notes to Condensed Consolidated Financial Statements — (Continued)
September 30, 2020
(unaudited)
41
Nine months ended September 30, 2020
Statement of operationsVirginMedia
VirginMedia
Finance
Otherguarantors VMIH VMIL
All othersubsidiaries Eliminations Total
in millions
Revenue ....................................................... £ — £ — £ — £ — £ — £ 3,791.9 £ — £ 3,791.9
Operating costs and expenses (exclusive ofdepreciation and amortization, shownseparately below):
Programming and other direct costs ofservices.................................................. — — — — — 1,167.8 — 1,167.8
Other operating ......................................... — — — — — 586.5 — 586.5
SG&A........................................................ 0.9 — — — — 522.4 — 523.3
Related-party fees and allocations,net.......................................................... — — — — — 248.2 — 248.2
Depreciation and amortization .................. — — — — — 1,017.1 — 1,017.1
Impairment, restructuring and otheroperating items, net ............................... — — — — — 21.2 — 21.2
0.9 — — — — 3,563.2 — 3,564.1
Operating income (loss) ......................... (0.9) — — — — 228.7 — 227.8
Non-operating income (expense):
Interest expense:
Third-party .............................................. — (46.2) — (80.5) — (301.7) — (428.4)
Intercompany and related-party .............. — (271.6) — (175.4) — (453.3) 898.6 (1.7)
Interest income – related-party andintercompany......................................... 0.7 67.1 — 141.4 — 877.3 (898.6) 187.9
Realized and unrealized gains (losses) onderivative instruments, net:
Third-party .............................................. — — — 144.5 — (2.1) — 142.4
Intercompany .......................................... — (1.9) — (52.8) — 54.7 — —
Foreign currency transaction gains(losses), net............................................ (5.6) (131.8) — (18.3) — 2.3 — (153.4)
Realized and unrealized gains due to changes in fair values of certain debt, net.......................................................... — — — 7.9 — — — 7.9
Losses on debt extinguishment, net .......... — (46.1) — (35.5) — (52.6) — (134.2)
Other expense, net..................................... — (0.1) — (0.6) — — — (0.7)
(4.9) (430.6) — (69.3) — 124.6 — (380.2)
Earnings (loss) before income taxes....... (5.8) (430.6) — (69.3) — 353.3 — (152.4)
Income tax benefit (expense)....................... (5.3) — — — — 227.3 — 222.0
Earnings (loss) after income taxes.......... (11.1) (430.6) — (69.3) — 580.6 — 69.6
Equity in net earnings of subsidiaries......... 76.0 523.7 93.1 592.9 518.7 — (1,804.4) —
Net earnings............................................ 64.9 93.1 93.1 523.6 518.7 580.6 (1,804.4) 69.6
Net earnings attributable to noncontrolling interest...................................................... — — — — — (4.7) — (4.7)
Net earnings attributable to parent ............ £ 64.9 £ 93.1 £ 93.1 £ 523.6 £ 518.7 £ 575.9 £ (1,804.4) £ 64.9
Total comprehensive earnings................... £ 55.8 £ 78.0 £ 78.0 £ 508.5 £ 503.6 £ 565.5 £ (1,728.9) £ 60.5
Comprehensive earnings attributable tononcontrolling interest ............................. — — — — — (4.7) — (4.7)
Comprehensive earnings attributable toparent..................................................... £ 55.8 £ 78.0 £ 78.0 £ 508.5 £ 503.6 £ 560.8 £ (1,728.9) £ 55.8
VIRGIN MEDIA INC.
Notes to Condensed Consolidated Financial Statements — (Continued)
September 30, 2020
(unaudited)
42
Nine months ended September 30, 2020
Statement of cash flows Virgin Media
VirginMedia
Finance VMIH
Allother
subsidiaries Total
in millions
Cash flows from operating activities:
Net cash provided (used) by operating activities .......... £ (6.2) £ (325.4) £ (338.0) £ 2,140.0 £ 1,470.4
Cash flows from investing activities:
Advances to related parties, net .................................... — — — (356.1) (356.1)
Capital expenditures, net............................................... — — — (313.0) (313.0)
Other investing activities, net........................................ — — — (0.8) (0.8)
Net cash used by investing activities.......................... — — — (669.9) (669.9)
Cash flows from financing activities:
Repayments and repurchases of third-party debt andfinance lease obligations ........................................... — (1,271.4) (3,095.0) (1,230.8) (5,597.2)
Borrowings of third-party debt ..................................... — 1,188.9 2,484.5 1,218.6 4,892.0
Net borrowings of related-party debt ............................ — — — 174.6 174.6
Payment of financing costs and debt premiums............ — (49.6) (39.6) (57.6) (146.8)
Net cash received related to derivative instruments...... — — 82.7 — 82.7
Contributions (distributions) ......................................... 4.6 456.8 905.4 (1,366.8) —
Other financing activities, net ....................................... — — — (12.8) (12.8)
Net cash provided (used) by financing activities ....... 4.6 324.7 338.0 (1,274.8) (607.5)
Effect of exchange rate changes on cash and cashequivalents and restricted cash .................................... 1.6 — — — 1.6
Net increase (decrease) in cash and cash equivalentsand restricted cash .................................................. — (0.7) — 195.3 194.6
Cash and cash equivalents and restricted cash:
Beginning of period.................................................... — 1.4 — 57.3 58.7
End of period .............................................................. £ — £ 0.7 £ — £ 252.6 £ 253.3
Details of end of period cash and cash equivalents andrestricted cash:
Cash and cash equivalents............................................. £ — £ 0.7 £ — £ 216.5 £ 217.2
Restricted cash included in other current assets andother assets, net ......................................................... — — — 36.1 36.1
Total cash and cash equivalents and restricted cash... £ — £ 0.7 £ — £ 252.6 £ 253.3
VIRGIN MEDIA INC.
Notes to Condensed Consolidated Financial Statements — (Continued)
September 30, 2020
(unaudited)
43
(14) Condensed Consolidating Financial Information — Senior Secured Notes
We present the following condensed consolidating financial information as of and for the three and nine months ended
September 30, 2020, as required by the applicable underlying indentures. For the condensed consolidating financial information
as of December 31, 2019 and for the three and nine months ended September 30, 2019, see our 2019 annual report and the
September 30, 2019 quarterly report, respectively.
As of September 30, 2020, Virgin Media Secured Finance PLC (Virgin Media Secured Finance) is the issuer of the following
senior secured notes:
• £441.3 million principal amount of 2025 VM Sterling Senior Secured Notes;
• $750.0 million (£580.9 million) principal amount of 2026 VM Dollar Senior Secured Notes;
• £675.0 million principal amount of 2027 VM Sterling Senior Secured Notes;
• $1,425.0 million (£1,103.7 million) principal amount of 2029 VM Dollar Senior Secured Notes;
• £340.0 million principal amount of 2029 VM Sterling Senior Secured Notes;
• £400.0 million principal amount of 2030 VM 4.25% Sterling Senior Secured Notes;
• $650.0 million (£503.4 million) principal amount of 2030 VM Dollar Senior Secured Notes; and
• £450.0 million principal amount of 2030 VM 4.125% Sterling Senior Secured Notes.
Our senior secured notes are issued by Virgin Media Secured Finance and are guaranteed on a senior basis by Virgin Media,
Virgin Media Group, Virgin Media Communications, VMIH and VMIL. They also rank pari passu with and, subject to certain
exceptions, share in the same guarantees and security which have been granted in favor of our VM Credit Facilities.
VIRGIN MEDIA INC.
Notes to Condensed Consolidated Financial Statements — (Continued)
September 30, 2020
(unaudited)
44
September 30, 2020
Balance sheetVirginMedia
Virgin MediaSecuredFinance Guarantors
Non-Guarantors Eliminations Total
in millions
ASSETS
Current assets:
Cash and cash equivalents................................ £ — £ 0.1 £ — £ 217.1 £ — £ 217.2
Related-party receivables ................................. 0.4 — 9.9 2.3 — 12.6
Other current assets:
Third-party..................................................... 1.3 — 744.9 118.9 — 865.1
Intercompany................................................. — 16.8 42.4 — (59.2) —
Total current assets...................................... 1.7 16.9 797.2 338.3 (59.2) 1,094.9
Property and equipment, net ............................... — — 5,390.4 564.4 — 5,954.8
Goodwill ............................................................. — — 5,793.7 227.0 — 6,020.7
Investments in, and loans to, parent andsubsidiary companies...................................... 6,191.2 4,451.3 (2,273.8) 3,253.2 (11,621.9) —
Deferred income taxes ........................................ — — 1,739.5 — — 1,739.5
Related-party notes receivable............................ 10.5 — — 5,040.5 — 5,051.0
Other assets, net:
Third-party ....................................................... — — 1,099.9 58.2 — 1,158.1
Intercompany.................................................... — 198.2 320.0 — (518.2) —
Total assets.................................................. £ 6,203.4 £ 4,666.4 £ 12,866.9 £ 9,481.6 £ (12,199.3) £ 21,019.0
LIABILITIES AND OWNERS’ EQUITY
Current liabilities:
Intercompany payables..................................... £ — £ — £ 387.3 £ 318.4 £ (705.7) £ —
Other current liabilities:
Third-party..................................................... 0.9 76.2 3,238.7 122.8 — 3,438.6
Intercompany and related-party..................... 6.4 2.1 216.4 27.9 (59.2) 193.6
Total current liabilities................................ 7.3 78.3 3,842.4 469.1 (764.9) 3,632.2
Long-term debt and finance lease obligations:
Third-party ....................................................... — 4,506.6 5,447.4 289.0 — 10,243.0
Related-party .................................................... — — — 232.1 — 232.1
Other long-term liabilities:
Third-party ....................................................... 28.1 — 705.7 22.6 — 756.4
Intercompany and related-party ....................... — 42.2 474.3 1.7 (518.2) —
Total liabilities ............................................ 35.4 4,627.1 10,469.8 1,014.5 (1,283.1) 14,863.7
Total parent’s equity.................................... 6,168.0 39.3 2,397.1 8,479.8 (10,916.2) 6,168.0
Noncontrolling interest ....................................... — — — (12.7) — (12.7)
Total owners’ equity.................................... 6,168.0 39.3 2,397.1 8,467.1 (10,916.2) 6,155.3
Total liabilities and owners’ equity .......... £ 6,203.4 £ 4,666.4 £ 12,866.9 £ 9,481.6 £ (12,199.3) £ 21,019.0
VIRGIN MEDIA INC.
Notes to Condensed Consolidated Financial Statements — (Continued)
September 30, 2020
(unaudited)
45
Three months ended September 30, 2020
Statement of operations Virgin Media
Virgin MediaSecuredFinance Guarantors
Non-Guarantors Eliminations Total
in millions
Revenue .......................................................... £ — £ — £ 1,141.4 £ 150.0 £ — £ 1,291.4
Operating costs and expenses (exclusive ofdepreciation and amortization, shownseparately below):
Programming and other direct costs ofservices .................................................. — — 350.9 45.4 — 396.3
Other operating.......................................... — — 176.3 37.6 — 213.9
SG&A........................................................ 0.3 — 159.9 23.9 — 184.1
Related-party fees and allocations, net...... — — 75.1 20.7 — 95.8
Depreciation and amortization .................. — — 305.2 29.2 — 334.4
Impairment, restructuring and otheroperating items, net ............................... — — 3.9 3.1 — 7.0
0.3 — 1,071.3 159.9 — 1,231.5
Operating income (loss).......................... (0.3) — 70.1 (9.9) — 59.9
Non-operating income (expense):
Interest expense:
Third-party ............................................. — (61.0) (72.0) (2.5) — (135.5)
Intercompany and related-party ............. — — (169.5) (125.4) 294.3 (0.6)
Interest income – related-party andintercompany ......................................... 0.2 58.5 161.9 134.7 (294.3) 61.0
Realized and unrealized gains (losses) onderivative instruments, net:
Third-party ............................................. — — (254.8) (0.2) — (255.0)
Intercompany.......................................... — (86.9) 86.6 0.3 — —
Foreign currency transaction gains(losses), net ............................................ 7.4 66.9 180.1 (0.8) — 253.6
Realized and unrealized gains due tochanges in fair values of certain debt,net .......................................................... — — 0.8 — — 0.8
Losses on debt extinguishment, net........... — — — (0.1) — (0.1)
Other income (expense), net...................... — — 1.2 (4.1) — (2.9)
7.6 (22.5) (65.7) 1.9 — (78.7)
Earnings (loss) before income taxes ....... 7.3 (22.5) 4.4 (8.0) — (18.8)
Income tax benefit (expense).......................... (1.0) — 210.2 — — 209.2
Earnings (loss) after income taxes .......... 6.3 (22.5) 214.6 (8.0) — 190.4
Equity in net earnings (loss) of subsidiaries ... 182.1 — (14.1) 210.4 (378.4) —
Net earnings (loss) .................................. 188.4 (22.5) 200.5 202.4 (378.4) 190.4
Net earnings attributable to noncontrollinginterest......................................................... — — — (2.0) — (2.0)
Net earnings (loss) attributable toparent .................................................. £ 188.4 £ (22.5) £ 200.5 £ 200.4 £ (378.4) £ 188.4
Total comprehensive earnings (loss)....... £ 178.5 £ (22.5) £ 200.1 £ 202.0 £ (377.6) £ 180.5
Comprehensive earnings attributable tononcontrolling interest ................................ — — — (2.0) — (2.0)
Comprehensive earnings (loss)attributable to parent ........................... £ 178.5 £ (22.5) £ 200.1 £ 200.0 £ (377.6) £ 178.5
VIRGIN MEDIA INC.
Notes to Condensed Consolidated Financial Statements — (Continued)
September 30, 2020
(unaudited)
46
Nine months ended September 30, 2020
Statement of operations Virgin Media
Virgin MediaSecuredFinance Guarantors
Non-Guarantors Eliminations Total
in millions
Revenue ................................................................ £ — £ — £ 3,354.1 £ 437.8 £ — £ 3,791.9
Operating costs and expenses (exclusive ofdepreciation and amortization, shownseparately below):
Programming and other direct costs ofservices ........................................................ — — 1,035.9 131.9 — 1,167.8
Other operating................................................ — — 505.7 80.8 — 586.5
SG&A.............................................................. 0.9 — 454.7 67.7 — 523.3
Related-party fees and allocations, net............ — — 192.8 55.4 — 248.2
Depreciation and amortization ........................ — — 933.0 84.1 — 1,017.1
Impairment, restructuring and other operatingitems, net ..................................................... — — 16.9 4.3 — 21.2
0.9 — 3,139.0 424.2 — 3,564.1
Operating income (loss)................................ (0.9) — 215.1 13.6 — 227.8
Non-operating income (expense):
Interest expense:
Third-party ................................................... — (186.7) (234.7) (7.0) — (428.4)
Intercompany and related-party ................... — — (529.1) (371.2) 898.6 (1.7)
Interest income – related-party andintercompany............................................... 0.7 179.6 500.6 405.6 (898.6) 187.9
Realized and unrealized gains (losses) onderivative instruments, net:
Third-party ................................................... — — 144.5 (2.1) — 142.4
Intercompany ............................................... — 57.2 (54.2) (3.0) — —
Foreign currency transaction gains (losses),net ................................................................ (5.6) (3.6) (187.2) 43.0 — (153.4)
Realized and unrealized gains due to changesin fair values of certain debt, net ................. — — 7.9 — — 7.9
Losses on debt extinguishment, net................. — (52.5) (81.6) (0.1) — (134.2)
Other income (loss), net .................................. — (0.1) 3.5 (4.1) — (0.7)
(4.9) (6.1) (430.3) 61.1 — (380.2)
Earnings (loss) before income taxes............. (5.8) (6.1) (215.2) 74.7 — (152.4)
Income tax benefit (expense)................................ (5.3) — 227.3 — — 222.0
Earnings (loss) after income taxes................ (11.1) (6.1) 12.1 74.7 — 69.6
Equity in net earnings of subsidiaries................... 76.0 — 81.0 23.1 (180.1) —
Net earnings (loss) ........................................ 64.9 (6.1) 93.1 97.8 (180.1) 69.6
Net earnings attributable to noncontrollinginterest .............................................................. — — — (4.7) — (4.7)
Net earnings (loss) attributable to parent...... £ 64.9 £ (6.1) £ 93.1 £ 93.1 £ (180.1) £ 64.9
Total comprehensive earnings (loss) ............ £ 55.8 £ (6.1) £ 78.0 £ 82.7 £ (149.9) £ 60.5
Comprehensive earnings attributable tononcontrolling interest...................................... — — — (4.7) — (4.7)
Comprehensive earnings (loss) attributableto parent .................................................... £ 55.8 £ (6.1) £ 78.0 £ 78.0 £ (149.9) £ 55.8
VIRGIN MEDIA INC.
Notes to Condensed Consolidated Financial Statements — (Continued)
September 30, 2020
(unaudited)
47
Nine months ended September 30, 2020
Statement of cash flowsVirginMedia
Virgin MediaSecuredFinance Guarantors
Non-Guarantors Total
in millions
Cash flows from operating activities:
Net cash provided (used) by operating activities.................. £ (6.2) £ (105.1) £ 1,106.6 £ 475.1 £ 1,470.4
Cash flows from investing activities:
Advances to related parties, net............................................ — — — (356.1) (356.1)
Capital expenditures, net ...................................................... — — (284.6) (28.4) (313.0)
Other investing activities, net ............................................... — — (0.8) — (0.8)
Net cash used by investing activities ................................. — — (285.4) (384.5) (669.9)
Cash flows from financing activities:
Repayments and repurchases of third-party debt and financelease obligations .................................................................. — (965.0) (4,370.2) (262.0) (5,597.2)
Borrowings of third-party debt................................................ — 979.2 3,673.4 239.4 4,892.0
Net borrowings of related party debt....................................... — — — 174.6 174.6
Payment of financing costs and debt premiums...................... — (56.0) (90.4) (0.4) (146.8)
Net cash received related to derivative instruments................ — — 82.7 — 82.7
Contributions (distributions) ................................................... 4.6 147.0 (120.4) (31.2) —
Other financing activities, net ................................................. — — (3.1) (9.7) (12.8)
Net cash provided (used) by financing activities.................. 4.6 105.2 (828.0) 110.7 (607.5)
Effect of exchange rate changes on cash and cash equivalentsand restricted cash.................................................................. 1.6 — — — 1.6
Net increase (decrease) in cash and cash equivalents andrestricted cash ................................................................... — 0.1 (6.8) 201.3 194.6
Cash and cash equivalents and restricted cash:
Beginning of period .............................................................. — — 39.2 19.5 58.7
End of period ........................................................................ £ — £ 0.1 £ 32.4 £ 220.8 £ 253.3
Details of end of period cash andcash equivalents and restricted cash:
Cash and cash equivalents....................................................... £ — £ 0.1 £ — £ 217.1 £ 217.2
Restricted cash included in other current assets and otherassets, net............................................................................. — — 32.4 3.7 36.1
Total cash and cash equivalents and restricted cash ............. £ — £ 0.1 £ 32.4 £ 220.8 £ 253.3
48
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis, which should be read in conjunction with our condensed consolidated financial
statements and the discussion and analysis included in our 2019 annual report, is intended to assist in providing an understanding
of our financial condition, changes in financial condition and results of operations and is organized as follows:
• Forward-looking Statements. This section provides a description of certain factors that could cause actual results or events
to differ materially from anticipated results or events.
• Overview. This section provides a general description of our business and recent events.
• Material Changes in Results of Operations. This section provides an analysis of our results of operations for the three
and nine months ended September 30, 2020 and 2019.
• Material Changes in Financial Condition. This section provides an analysis of our corporate and subsidiary liquidity,
condensed consolidated statements of cash flows and contractual commitments.
The capitalized terms used below have been defined in the notes to our condensed consolidated financial statements. In the
following text, the terms “we,” “our,” “our company” and “us” may refer, as the context requires, to Virgin Media or collectively
to Virgin Media and its subsidiaries.
Unless otherwise indicated, convenience translations into pound sterling are calculated as of September 30, 2020.
Forward-looking Statements
Certain statements in this quarterly report constitute forward-looking statements. To the extent that statements in this quarterly
report are not recitations of historical fact, such statements constitute forward-looking statements, which, by definition, involve
risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements. In
particular, statements under Management’s Discussion and Analysis of Financial Condition and Results of Operations may contain
forward-looking statements, including statements regarding our business, product, foreign currency and finance strategies, future
network extensions, subscriber growth and retention rates, competitive, regulatory and economic factors, the timing and impacts
of proposed transactions, the maturity of our markets, the potential impact of COVID-19 on our company, the anticipated impacts
of new legislation (or changes to existing rules and regulations), anticipated changes in our revenue, costs or growth rates, our
liquidity, credit risks, foreign currency risks, interest rate risks, target leverage levels, debt covenants, our future projected
contractual commitments and cash flows and other information and statements that are not historical fact. Where, in any forward-
looking statement, we express an expectation or belief as to future results or events, such expectation or belief is expressed in good
faith and believed to have a reasonable basis, but there can be no assurance that the expectation or belief will result or be achieved
or accomplished. In evaluating these statements, you should consider the risks and uncertainties discussed in our 2019 annual
report and this quarterly report, as well as the following list of some but not all of the factors that could cause actual results or
events to differ materially from anticipated results or events:
• economic and business conditions and industry trends in the U.K. and Ireland;
• the competitive environment in the broadband internet, cable television and telecommunications industries in the U.K.
and Ireland, including competitor responses to our products and services;
• fluctuations in currency exchange rates and interest rates;
• instability in global financial markets, including sovereign debt issues in the E.U. and related fiscal reforms;
• consumer disposable income and spending levels, including the availability and amount of individual consumer debt;
• changes in consumer television viewing and broadband internet usage preferences and habits;
• consumer acceptance of our existing service offerings, including our broadband internet, cable television, fixed-line
telephony, mobile and business service offerings, and of new technology, programming alternatives and other products
and services that we may offer in the future;
49
• our ability to manage rapid technological changes;
• our ability to maintain or increase the number of subscriptions to our broadband internet, cable television, fixed-line
telephony and mobile service offerings and our average revenue per household;
• our ability to provide satisfactory customer service, including support for new and evolving products and services;
• our ability to maintain or increase rates to our subscribers or to pass through increased costs to our subscribers;
• the impact of our future financial performance, or market conditions generally, on the availability, terms and deployment
of capital;
• changes in, or failure or inability to comply with, government regulations in the U.K. and Ireland and adverse outcomes
from regulatory proceedings;
• government intervention that impairs our competitive position, including any intervention that would open our broadband
distribution networks to competitors and any adverse change in our accreditations or licenses;
• our ability to obtain regulatory approval and satisfy other conditions necessary to close acquisitions and dispositions and
the impact of conditions imposed by competition and other regulatory authorities in connection with acquisitions;
• our ability to successfully acquire new businesses and, if acquired, to integrate, realize anticipated efficiencies from, and
implement our business plan with respect to, the businesses we have acquired or that we expect to acquire;
• changes in laws or treaties relating to taxation, or the interpretation thereof, in the U.K. and Ireland;
• changes in laws and government regulations that may impact the availability and cost of capital and the derivative
instruments that hedge certain of our financial risks;
• our ability to navigate the potential impacts on our business of the U.K.’s departure from the E.U.;
• the ability of suppliers and vendors (including our third-party wireless network providers under our MVNO arrangements)
to timely deliver quality products, equipment, software, services and access;
• the availability of attractive programming for our video services and the costs associated with such programming;
• uncertainties inherent in the development and integration of new business lines and business strategies;
• our ability to adequately forecast and plan future network requirements, including the costs and benefits associated with
the Network Extension;
• the availability of capital for the acquisition and/or development of telecommunications networks and services;
• problems we may discover post-closing with the operations, including the internal controls and financial reporting process,
of businesses we acquire;
• the leakage of sensitive customer data;
• the outcome of any pending or threatened litigation;
• the loss of key employees and the availability of qualified personnel;
• changes in the nature of key strategic relationships with partners and joint venturers;
50
• adverse changes in public perception of the “Virgin” brand, which we and others license from Virgin Enterprises Limited,
and any resulting impacts on the goodwill of customers toward us; and
• events that are outside of our control, such as political unrest in international markets, terrorist attacks, malicious human
acts, natural disasters, pandemics or epidemics (such as COVID-19) and other similar events.
The broadband distribution and mobile service industries are changing rapidly and, therefore, the forward-looking statements
of expectations, plans and intent in this quarterly report are subject to a significant degree of risk. These forward-looking statements
and the above-described risks, uncertainties and other factors speak only as of the date of this quarterly report, and we expressly
disclaim any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement contained herein,
to reflect any change in our expectations with regard thereto, or any other change in events, conditions or circumstances on which
any such statement is based. Readers are cautioned not to place undue reliance on any forward-looking statement.
Overview
General
We are a subsidiary of Liberty Global that provides broadband internet, video, fixed-line telephony, mobile and broadcasting
services in the U.K. and Ireland. We are one of the U.K.’s and Ireland’s largest providers of broadband internet, residential video,
and fixed-line telephony services in terms of the number of customers. We believe our advanced, deep-fiber cable access network
enables us to offer faster and higher quality broadband internet services than our digital subscriber line market participants. As a
result, we provide our customers with a leading next generation broadband internet service and one of the most advanced interactive
television services available in the U.K. and Irish markets.
Operations
At September 30, 2020, our network passed 16,135,700 homes and served 6,020,200 fixed-line customers and 3,464,800
mobile subscribers.
During the first nine months of 2020, pursuant to the Network Extension, we connected approximately 311,000 additional
residential and commercial premises (excluding upgrades) to our two-way networks in the U.K. and Ireland. Depending on a
variety of factors, including the financial and operational results of this program, the Network Extension may be continued, modified
or cancelled at our discretion.
Impact of COVID-19
In March 2020, the World Health Organization declared the outbreak of COVID-19 to be a global pandemic. In response to
the COVID-19 pandemic, emergency measures were imposed by governments worldwide, including travel restrictions, restrictions
on social activity and the shutdown of non-essential businesses. These measures have adversely impacted the global economy,
disrupted global supply chains and created significant volatility and disruption of financial markets. While it is not currently
possible to estimate the duration and severity of the COVID-19 pandemic or the adverse economic impact resulting from the
preventative measures taken to contain or mitigate its outbreak, an extended period of global economic disruption could have a
material adverse impact on our business, financial condition and results of operations in future periods, including with respect to,
among other items, (i) our ability to access capital necessary to fund property and equipment additions, debt service requirements,
acquisitions and other investment opportunities or other liquidity needs, (ii) the ability of our customers to pay for our products
and services, (iii) our ability to maintain or increase our residential and business subscriber levels, (iv) our ability to offer attractive
programming, particularly in consideration of the recent cancellation of numerous worldwide sporting events, and (v) the ability
of our suppliers and vendors to provide products and services to us. We may also be adversely impacted by any government
mandated regulations on our business that could be implemented in response to the COVID-19 pandemic. In addition, the countries
in which we operate may seek new or increased revenue sources due to fiscal deficits that result from measures taken to mitigate
the adverse economic impacts of COVID-19, such as by imposing new taxes on the products and services we provide. We are
currently unable to predict the extent of any of these potential adverse effects. For information regarding the impact of COVID-19
on our results of operations for the three and nine months ended September 30, 2020, see Discussion and Analysis of our Results
of Operations below.
51
Competition and Other External Factors
We are experiencing competition from incumbent telecommunications operators, direct-to-home satellite operators and/or
other providers. This competition, together with macroeconomic and regulatory factors, has adversely impacted our revenue,
number of customers and/or average monthly subscription revenue per fixed-line customer or mobile subscriber, as applicable
(ARPU). For additional information regarding the revenue impact of changes in fixed-line customers and ARPU, see Discussion
and Analysis of our Results of Operations below.
In addition to competition, our operations are subject to macroeconomic, political and other risks that are outside of our
control. For example, on June 23, 2016, the U.K. held a referendum in which voters approved, on an advisory basis, an exit from
the E.U., commonly referred to as “Brexit.” The U.K. formally exited the E.U. on January 31, 2020, and has now entered into a
transition period until December 31, 2020, during which the U.K. and the E.U. will negotiate to formalize the future U.K.-E.U.
relationship with respect to a number of matters, most notably trade. Although the U.K. has ceased to be an E.U. member, during
the transition period their trading relationship will remain the same and the U.K. will continue to follow the E.U.’s rules, such as
accepting rulings from the European Court of Justice, and the U.K. will continue to contribute to the E.U.’s budget. Uncertainty
remains as to what specific terms of separation may be agreed during the transition period. It is possible that the U.K. will fail to
agree to specific separation terms with the E.U. by the end of the transition period, which, absent extension, may require the U.K.
to leave the E.U. under a so-called “hard Brexit” or “no-deal Brexit” without specific agreements on trade, finance and other key
elements. The foregoing has caused uncertainty as to Brexit’s impact on the free movement of goods, services, people and capital
between the U.K. and the E.U., customer behavior, economic conditions, interest rates, currency exchange rates and availability
of capital. The effects of Brexit could adversely affect our business, results of operations and financial condition.
Discussion and Analysis of our Results of Operations
General
Most of our revenue is subject to VAT or similar revenue-based taxes. Any increases in these taxes could have an adverse
impact on our ability to maintain or increase our revenue to the extent that we are unable to pass such tax increases on to our
customers. In the case of revenue-based taxes for which we are the ultimate taxpayer, we will also experience increases in our
operating expenses and corresponding declines in our Segment Adjusted EBITDA and Segment Adjusted EBITDA margin (Segment
Adjusted EBITDA divided by revenue) to the extent of any such tax increases. As we use the term, “Segment Adjusted
EBITDA” (previously referred to as “Segment OCF”) is defined as earnings (loss) before net income tax benefit (expense), other
non-operating income or expenses, net gains (losses) on extinguishment of debt, net realized and unrealized gains (losses) due to
changes in fair value of certain debt, net foreign currency gains (losses), net realized and unrealized gains (losses) on derivative
instruments, net interest expense, net interest income, depreciation and amortization, share-based compensation, provisions and
provision releases related to significant litigation and impairment, restructuring and other operating items. Other operating items
include (i) gains and losses on the disposition of long-lived assets, (ii) third-party costs directly associated with successful and
unsuccessful acquisitions and dispositions, including legal, advisory and due diligence fees, as applicable, and (iii) other acquisition-
related items, such as gains and losses on the settlement of contingent consideration. Segment Adjusted EBITDA is a non-GAAP
measure, which we believe is a meaningful measure because it represents a transparent view of our recurring operating performance
that is unaffected by our capital structure and allows management to (1) readily view operating trends and (2) identify strategies
to improve operating performance in the U.K. and Ireland. Investors should view Segment Adjusted EBITDA as a supplement to,
and not a substitute for, GAAP measures of performance included in our condensed consolidated statements of operations.
We pay interconnection fees to other telephony providers when calls or text messages from our subscribers terminate on
another network, and we receive similar fees from such providers when calls or text messages from their customers terminate on
our networks or networks that we access through MVNO or other arrangements. The amounts we charge and incur with respect
to fixed-line telephony and mobile interconnection fees are subject to regulatory oversight. To the extent that regulatory authorities
introduce fixed-line or mobile termination rate changes, we would experience prospective changes and, in very limited cases, we
could experience retroactive changes in our interconnect revenue and/or costs. The ultimate impact of any such changes in
termination rates on our Segment Adjusted EBITDA would be dependent on the call or text messaging patterns that are subject to
the changed termination rates.
52
We are subject to inflationary pressures with respect to certain costs and foreign currency exchange risk with respect to costs
and expenses that are denominated in currencies other than British pound sterling. Any cost increases that we are not able to pass
on to our subscribers through rate increases would result in increased pressure on our operating margins.
Revenue
General. We derive our revenue primarily from residential and B2B communications services, including broadband internet,
video, fixed-line telephony and mobile services.
Variances in the subscription revenue that we receive from our customers are a function of (i) changes in the number of our
fixed-line customers or mobile subscribers outstanding during the period and (ii) changes in ARPU. Changes in ARPU can be
attributable to (a) changes in prices, (b) changes in bundling or promotional discounts, (c) changes in the tier of services selected,
(d) variances in subscriber usage patterns and (e) the overall mix of cable and mobile products during the period.
Our revenue by major category is set forth below:
Three months endedSeptember 30, Increase (decrease)
Organicincrease
(decrease)
2020 2019 £ % %
in millions, except percentages
Residential revenue:
Residential cable revenue (a):
Subscription revenue (b):
Broadband internet ................................................................ £ 429.9 £ 418.6 £ 11.3 2.7 2.7
Video ..................................................................................... 268.5 266.8 1.7 0.6 0.6
Fixed-line telephony ............................................................. 192.3 211.0 (18.7) (8.9) (8.9)
Total subscription revenue.................................................. 890.7 896.4 (5.7) (0.6) (0.7)
Non-subscription revenue........................................................ 17.7 13.9 3.8 27.3 28.0
Total residential cable revenue......................................... 908.4 910.3 (1.9) (0.2) (0.2)
Residential mobile revenue (c):
Subscription revenue (b).......................................................... 92.0 92.6 (0.6) (0.6) (0.7)
Non-subscription revenue........................................................ 79.0 72.5 6.5 9.0 9.0
Total residential mobile revenue ...................................... 171.0 165.1 5.9 3.6 3.6
Total residential revenue ................................................ 1,079.4 1,075.4 4.0 0.4 0.3
B2B revenue (d):
Subscription revenue.................................................................. 25.3 22.6 2.7 11.9 11.6
Non-subscription revenue .......................................................... 175.1 167.9 7.2 4.3 4.3
Total B2B revenue .............................................................. 200.4 190.5 9.9 5.2 5.2
Other revenue (e).......................................................................... 11.6 15.8 (4.2) (26.6) (28.1)
Total.................................................................................. £ 1,291.4 £ 1,281.7 £ 9.7 0.8 0.7
53
Nine months endedSeptember 30, Increase (decrease)
Organicincrease
(decrease)
2020 2019 £ % %
in millions, except percentages
Residential revenue:
Residential cable revenue (a):
Subscription revenue (b):
Broadband internet ............................................................... £ 1,282.1 £ 1,249.9 £ 32.2 2.6 2.6
Video .................................................................................... 800.1 797.1 3.0 0.4 0.4
Fixed-line telephony............................................................. 591.9 644.9 (53.0) (8.2) (8.2)
Total subscription revenue ................................................. 2,674.1 2,691.9 (17.8) (0.7) (0.7)
Non-subscription revenue....................................................... 44.1 43.3 0.8 1.8 1.9
Total residential cable revenue ........................................ 2,718.2 2,735.2 (17.0) (0.6) (0.6)
Residential mobile revenue (c):
Subscription revenue (b)......................................................... 269.7 269.3 0.4 0.1 0.1
Non-subscription revenue....................................................... 193.2 209.4 (16.2) (7.7) (7.7)
Total residential mobile revenue...................................... 462.9 478.7 (15.8) (3.3) (3.3)
Total residential revenue ............................................... 3,181.1 3,213.9 (32.8) (1.0) (1.0)
B2B revenue (d):
Subscription revenue................................................................. 73.4 66.0 7.4 11.2 11.1
Non-subscription revenue ......................................................... 500.0 507.8 (7.8) (1.5) (1.5)
Total B2B revenue ............................................................. 573.4 573.8 (0.4) (0.1) (0.1)
Other revenue (e) ......................................................................... 37.4 48.8 (11.4) (23.4) (23.9)
Total ................................................................................. £ 3,791.9 £ 3,836.5 £ (44.6) (1.2) (1.2)
_______________
(a) Residential cable subscription revenue includes amounts received from subscribers for ongoing services and the recognition
of deferred installation revenue over the associated contract period. Residential cable non-subscription revenue includes,
among other items, channel carriage fees, late fees and revenue from the sale of equipment.
(b) Residential subscription revenue from subscribers who purchase bundled services at a discounted rate is generally allocated
proportionally to each service based on the standalone price for each individual service. As a result, changes in the standalone
pricing of our cable and mobile products or the composition of bundles can contribute to changes in our product revenue
categories from period to period.
(c) Residential mobile subscription revenue includes amounts received from subscribers for ongoing services. Residential
mobile non-subscription revenue includes, among other items, interconnect revenue and revenue from sales of mobile
handsets and other devices. Residential mobile interconnect revenue was £13.8 million and £15.5 million during the three
months ended September 30, 2020 and 2019, respectively, and £42.7 million and £46.8 million during the nine months
ended September 30, 2020 and 2019, respectively.
(d) B2B subscription revenue represents revenue from SOHO subscribers. SOHO subscribers pay a premium price to receive
expanded service levels along with broadband internet, video, fixed-line telephony or mobile services that are the same or
similar to the mass marketed products offered to our residential subscribers. A portion of the increase in our B2B subscription
revenue is attributable to the conversion of certain residential subscribers to SOHO subscribers. B2B non-subscription
revenue includes (i) revenue from business broadband internet, video, fixed-line telephony, mobile and data services offered
to medium to large enterprises and, on a wholesale basis, to other operators and (ii) revenue from long-term leases of portions
of our network.
54
(e) Other revenue primarily includes broadcasting revenue in Ireland.
The details of the changes in our revenue during the three and nine months ended September 30, 2020, as compared to the
corresponding periods in 2019, are set forth below:
Three-month period Nine-month period
Subscription
revenue
Non-
subscription
revenue Total
Subscription
revenue
Non-
subscription
revenue Total
in millions
Increase (decrease) in residential cablesubscription revenue due to change in:
Average number of customers .............. £ 2.6 £ — £ 2.6 £ (2.9) £ — £ (2.9)
ARPU (a) .............................................. (8.5) — (8.5) (15.1) — (15.1)
Increase in residential cable non-subscription revenue (b) ....................... — 3.7 3.7 — 0.7 0.7
Total increase (decrease) inresidential cable revenue................. (5.9) 3.7 (2.2) (18.0) 0.7 (17.3)
Increase (decrease) in residential mobilerevenue (c) ............................................ (0.6) 6.5 5.9 0.5 (16.2) (15.7)
Increase (decrease) in B2B revenue (d) ... 2.6 7.6 10.2 7.3 (7.9) (0.6)
Decrease in other revenue (e)................... — (4.4) (4.4) — (11.4) (11.4)
Total organic increase (decrease) ....... (3.9) 13.4 9.5 (10.2) (34.8) (45.0)
Impact of foreign currency translation effects (FX)........................................... 0.1 0.1 0.2 0.1 0.3 0.4
Total.................................................... £ (3.8) £ 13.5 £ 9.7 £ (10.1) £ (34.5) £ (44.6)
_______________
(a) The decreases in cable subscription revenue related to changes in ARPU were adversely impacted by the COVID-19
pandemic, most notably with respect to video services, including lower revenue of approximately £22 million in the second
quarter and some further impacts in the third quarter associated with the loss of exclusive programming content. The second
quarter impact comprises (i) credits that were given to certain customers and (ii) the estimated impact of certain customers
canceling their premium sports subscriptions.
(b) The increases in residential cable non-subscription revenue are primarily attributable to (i) lower revenue from late fees in
the U.K., including, for the nine-month comparison, the impact of a temporary suspension of late payment charges related
to the COVID-19 pandemic, (ii) increases in installation revenue, primarily in the U.K., and (iii) increases in early termination
fees in the U.K.
(c) The changes in residential mobile non-subscription revenue are primarily attributable to the net effect of (i) an increase for
the three-month comparison and a decrease for the nine-month comparison in revenue from mobile handset sales in the
U.K. and (ii) lower interconnect and mobile roaming revenue driven by stay-at-home behaviors during the COVID-19
pandemic. The changes in revenue from mobile handset sales in the U.K. include (a) the positive impact of £16.5 million
of revenue recognized in the third quarter of 2020 in connection with the completion of the VM Receivables Financing Sale
and (b) for the nine-month comparison, the adverse impact of retail store closures during the COVID-19 pandemic. The
decrease in residential mobile non-subscription revenue for the nine-month comparison also includes the unfavorable impact
of £4.1 million of revenue recognized during the second quarter of 2019 in connection with the sale of rights to future
commission payments on customer handset insurance arrangements in the U.K.
(d) The increases in B2B subscription revenue are primarily due to increases in the average number of SOHO customers in the
U.K. The changes in B2B non-subscription revenue are primarily attributable to our operations in the U.K., including the
net effect of (i) decreases in lower margin revenue related to business network services, (ii) increases in revenue associated
with long-term leases of a portion of our network and (iii) lower installation revenue.
55
(e) The decreases in other revenue are attributable to lower broadcasting revenue in Ireland, largely due to the impact of the
COVID-19 pandemic.
Programming and other direct costs of services
Programming and other direct costs of services include programming and copyright costs, interconnect and access costs, costs
of mobile handsets and other devices and other direct costs related to our operations. Programming and copyright costs represent
a significant portion of our operating costs and are subject to rise in future periods due to various factors, including (i) higher costs
associated with the expansion of our digital video content, including rights associated with ancillary product offerings and rights
that provide for the broadcast of live sporting events, and (ii) rate increases.
Our programming and other direct costs of services decreased £9.8 million or 2.4% and £29.9 million or 2.5% during the
three and nine months ended September 30, 2020, respectively, as compared to the corresponding periods in 2019. On an organic
basis, our programming and other direct costs of services decreased £9.9 million or 2.4% and £30.0 million or 2.5%, respectively.
These decreases include the following factors:
• Decreases in programming and copyright costs of £8.1 million or 3.5% and £23.1 million or 3.4%, respectively, primarily
due to lower costs for certain premium and/or basic content, including credits or rebates aggregating £14.0 million and
£36.5 million, respectively, received in connection with the loss of exclusive programming content due to the COVID-19
pandemic, which generally offset the adverse revenue impacts resulting from the COVID-19 pandemic;
• Decreases in mobile handset and other device costs of £6.2 million or 13.1% and £13.8 million or 10.9%, respectively,
primarily due to the net effect of (i) lower sales volumes, largely due to temporary retail store closures as a result of the
COVID-19 pandemic, and (ii) a higher average cost per handset sold; and
• Increases in interconnect and access costs of £1.2 million or 1.2% and £11.6 million or 3.9%, respectively, primarily due
to (i) for the nine-month comparison, an increase in interconnect and mobile roaming costs and (ii) higher MVNO costs.
Interconnect and mobile roaming costs during the 2020 periods have been impacted by changes in mobile usage associated
with factors such as lower travel and the use of WiFi alternatives during stay-at-home mandates or recommendations as
a result of the COVID-19 pandemic.
Other operating expenses
Other operating expenses include network operations, customer operations, customer care and other costs related to our
operations.
Our other operating expenses increased £35.3 million or 19.8% and £50.4 million or 9.4% during the three and nine months
ended September 30, 2020, respectively, as compared to the corresponding periods in 2019. On an organic basis, our other operating
expenses increased £35.5 million or 19.9% and £50.5 million or 9.4%, respectively. These increases include the following factors:
• Increases in personnel costs of £10.2 million or 20.7% and £18.6 million or 11.9%, respectively, primarily due to the net
effect of (i) higher staffing levels, (ii) for the nine-month comparison, a lower average cost per employee and (iii) decreases
in temporary personnel costs;
• Increases in other operating expenses due to £15.8 million recognized during the third quarter of 2020 associated with
the completion of the VM Receivables Financing Sale, representing the difference between the carrying amount of the
associated receivables and the amount received pursuant to the sale;
• Higher costs associated with a £12.9 million charge recorded during the third quarter of 2020 in connection with the
reassessment of certain items related to prior years;
• Increases in network infrastructure charges of £1.8 million and £12.9 million, respectively, following an increase in the
rateable value of certain of our assets. For additional information, see “Other Regulatory Matters” in note 11 to our
condensed consolidated financial statements; and
56
• Decreases in customer service costs of £4.9 million or 14.7% and £12.7 million or 13.4%, respectively, primarily due to
lower call center costs, which include the impact of lockdowns during the second and, to a lesser extent, third quarter of
2020 associated with the COVID-19 pandemic, which prevented certain outsourced contract services from being
performed.
SG&A expenses
SG&A expenses include human resources, information technology, general services, management, finance, legal, external
sales and marketing costs, share-based compensation and other general expenses.
Our SG&A expenses increased (decreased) £9.8 million or 5.6% and (£17.1 million) or (3.2%) during the three and nine
months ended September 30, 2020, respectively, as compared to the corresponding periods in 2019. Our SG&A expenses include
share-based compensation expense, which increased £6.6 million and £2.4 million during the three and nine months ended
September 30, 2020, respectively, as compared to the corresponding periods in 2019. On an organic basis, and excluding share-
based compensation, our SG&A expenses increased (decreased) £3.1 million or 1.9% and (£19.5 million) or (3.9%), respectively.
These changes include the following factors:
• An increase (decrease) in external sales and marketing costs of £2.1 million or 4.3% and (£11.7 million) or (8.2%),
respectively, primarily due to the net effect of changes associated with advertising campaigns, as advertising costs were
(i) higher for the three-month comparison and (ii) lower for the nine-month comparison;
• Decreases in core network and information technology-related costs of £1.3 million or 7.0% and £5.2 million or 9.4%,
respectively, primarily due to lower information technology-related expenses;
• Decreases in customer service costs of £1.7 million or 26.1% and £3.1 million or 17.7%, respectively, primarily due to
lower call center costs;
• Increases in business service costs of £1.3 million or 9.4% and £2.6 million or 6.3%, respectively, primarily due to the
net effect of (i) higher consulting costs and (ii) decreases in travel and entertainment expenses; and
• An increase (decrease) in personnel costs of £4.6 million or 7.2% and (£1.3 million) or (0.6%), respectively, primarily
due to the net effect of (i) lower staffing levels, (ii) higher average costs per employee, (iii) decreases in temporary
personnel costs and (iv) higher incentive compensation costs. The higher average cost per employee for the nine-month
comparison includes the impact of lower severance costs of £4.9 million associated with revisions to our operating model
and decreases in senior management personnel during the second quarter of 2019.
Related-party fees and allocations, net
We recorded related-party fees and allocations, net, related to our estimated share of the applicable costs incurred by Liberty
Global’s subsidiaries of £95.8 million and £248.2 million during the three and nine months ended September 30, 2020, respectively,
as compared to £65.6 million and £144.1 million during the three and nine months ended September 30, 2019, respectively. These
charges generally relate to management, finance, legal and other corporate and administrative services provided to or by our
subsidiaries. For additional information, including the impact of the T&I Allocation on our related-party fees and allocations, net,
see note 10 to our condensed consolidated financial statements.
Depreciation and amortization expense
Our depreciation and amortization expense decreased £98.1 million or 22.7% and £303.0 million or 23.0% during the three
and nine months ended September 30, 2020, respectively, as compared to the corresponding periods in 2019. Excluding the effects
of FX, depreciation and amortization expense decreased £97.5 million or 22.5% and £302.5 million or 22.9%, respectively. These
decreases are primarily due to the net effect of (i) decreases associated with certain assets becoming fully depreciated, (ii) decreases
due to assets becoming fully amortized and (iii) increases associated with property and equipment additions related to the installation
of customer premises equipment, the expansion and upgrade of our networks and other capital initiatives.
57
Impairment, restructuring and other operating items, net
We recognized impairment, restructuring and other operating items, net, of £7.0 million and £21.2 million during the three
and nine months ended September 30, 2020, respectively, as compared to £5.4 million and £46.6 million during the three and nine
months ended September 30, 2019, respectively. The amounts for the 2020 periods include restructuring charges of £1.8 million
and £11.8 million, respectively, primarily due to certain reorganization activities that resulted in employee severance and termination
costs and costs related to property closures. The amounts for the 2019 periods primarily include (i) restructuring charges of £6.0
million and £27.0 million, respectively, primarily due to certain reorganization activities that resulted in employee severance and
termination costs and costs related to property closures, and (ii) for the nine-month period, impairment charges of £17.1 million
related to the write-off of certain network assets during the three months ended March 31, 2019.
Interest expense – third-party
Our third-party interest expense decreased £28.1 million or 17.2% and £57.6 million or 11.9% during the three and nine
months ended September 30, 2020, respectively, as compared to the corresponding periods in 2019. These decreases are due to
the net effect of (i) lower weighted average interest rates and (ii) higher average outstanding third-party debt balances. For additional
information regarding our outstanding third-party indebtedness, see note 7 to our condensed consolidated financial statements.
It is possible that the interest rates on (i) any new borrowings could be higher than the current interest rates on our existing
indebtedness and (ii) our variable-rate indebtedness could increase in future periods. As further discussed in note 4 to our condensed
consolidated financial statements, we use derivative instruments to manage our interest rate risks.
In July 2017, the U.K. Financial Conduct Authority (the authority that regulates LIBOR) announced that it intends to stop
compelling banks to submit rates for the calculation of LIBOR after 2021. Additionally, the European Money Markets Institute
(the authority that administers EURIBOR) has announced that measures will need to be undertaken by the end of 2021 to reform
EURIBOR to ensure compliance with E.U. Benchmarks Regulation. Currently, it is not possible to predict the exact transitional
arrangements for calculating applicable reference rates that may be made in the U.K., the U.S., the eurozone or elsewhere given
that a number of outcomes are possible, including the cessation of the publication of one or more reference rates. Our loan documents
contain provisions that contemplate alternative calculations of the base rate applicable to our LIBOR-indexed and EURIBOR-
indexed debt to the extent LIBOR or EURIBOR (as applicable) are not available, which alternative calculations we do not anticipate
will be materially different from what would have been calculated under LIBOR or EURIBOR (as applicable). Additionally, no
mandatory prepayment or redemption provisions would be triggered under our loan documents in the event that either the LIBOR
rate or the EURIBOR rate is not available. It is possible, however, that any new reference rate that applies to our LIBOR-indexed
or EURIBOR-indexed debt could be different than any new reference rate that applies to our LIBOR-indexed or EURIBOR-
indexed derivative instruments. We anticipate managing this difference and any resulting increased variable-rate exposure through
modifications to our debt and/or derivative instruments, however, future market conditions may not allow immediate
implementation of desired modifications and the company may incur significant associated costs.
Interest expense – related-party
Our related-party interest expense remained relatively unchanged during the three and nine months ended September 30, 2020,
as compared to the corresponding periods in 2019. For additional information regarding our related-party indebtedness, see note
10 to our condensed consolidated financial statements.
Interest income – related-party
Our related-party interest income decreased £10.3 million or 14.4% and £25.3 million or 11.9% during the three and nine
months ended September 30, 2020, respectively, as compared to the corresponding periods in 2019, primarily attributable to lower
weighted average interest rates on intercompany notes receivable due from LG Europe 2. For additional information, see note 10
to our condensed consolidated financial statements.
58
Realized and unrealized gains (losses) on derivative instruments, net
Our realized and unrealized gains or losses on derivative instruments include (i) unrealized changes in the fair values of our
derivative instruments that are non-cash in nature until such time as the derivative contracts are fully or partially settled and (ii)
realized gains or losses upon the full or partial settlement of the derivative contracts. The details of our realized and unrealized
gains (losses) on derivative instruments, net, are as follows:
Three months endedSeptember 30,
Nine months endedSeptember 30,
2020 2019 2020 2019
in millions
Cross-currency and interest rate derivative contracts (a) ................... £ (253.4) £ 257.6 £ 143.0 £ 318.3
Foreign currency forward and option contracts:
Third-party ....................................................................................... (1.6) 0.6 (0.6) 1.6
Related-party.................................................................................... — — — (0.9)
Total ............................................................................................... £ (255.0) £ 258.2 £ 142.4 £ 319.0
_______________
(a) The results during the 2020 periods are primarily attributable to the net effect of (i) a net loss for the three-month period
and a net gain for the nine-month period associated with changes in the relative value of certain currencies and (ii) net losses
associated with changes in certain market interest rates. In addition, the results for the 2020 periods include net gains of
£40.6 million and £45.8 million, respectively, resulting from changes in our credit risk valuation adjustments. The gains
during the 2019 periods are primarily attributable to (i) net gains associated with changes in the relative value of certain
currencies and (ii) for the nine-month period, net gains associated with changes in certain market interest rates. In addition,
the gains during the 2019 periods include net losses of £15.1 million and £17.3 million, respectively, resulting from changes
in our credit risk valuation adjustments.
For additional information regarding our derivative instruments, see notes 4 and 5 to our condensed consolidated financial
statements.
Foreign currency transaction gains (losses), net
Our foreign currency transaction gains or losses primarily result from the remeasurement of monetary assets and liabilities
that are denominated in currencies other than the underlying functional currency of the applicable entity. Unrealized foreign
currency transaction gains or losses are computed based on period-end exchange rates and are non-cash in nature until such time
as the amounts are settled. The details of our foreign currency transaction gains (losses), net, are as follows:
Three months endedSeptember 30,
Nine months endedSeptember 30,
2020 2019 2020 2019
in millions
Euro-denominated debt issued by our company ................................ £ 0.4 £ (3.5) £ (72.5) £ (5.2)
U.S. dollar-denominated debt issued by our company....................... 126.1 (100.8) (54.4) (112.5)
Intercompany payables and receivables denominated in a currencyother than the entity’s functional currency (a)................................ 117.9 (101.7) (25.2) (117.3)
Other................................................................................................... 9.2 (1.7) (1.3) (3.2)
Total ............................................................................................... £ 253.6 £ (207.7) £ (153.4) £ (238.2)
_______________
(a) Amounts primarily relate to loans between certain of our non-operating subsidiaries.
59
Realized and unrealized gains (losses) due to changes in fair values of certain debt, net
Our realized and unrealized gains or losses due to changes in fair values of certain debt include unrealized gains or losses
associated with changes in fair values that are non-cash in nature until such time as these gains or losses are realized through cash
transactions. We recognized realized and unrealized gains (losses) due to changes in fair values of certain debt, net, of £0.8 million
and £7.9 million during the three and nine months ended September 30, 2020, respectively, as compared to (£2.2 million) and
(£19.7 million) during the three and nine months ended September 30, 2019, respectively. For additional information regarding
our fair value measurements, see note 5 to our condensed consolidated financial statements.
Losses on debt extinguishment, net
We recognized net losses on debt extinguishment of £0.1 million and £23.3 million during the three months ended September
30, 2020 and 2019, respectively, and £134.2 million and £61.2 million during the nine months ended September 30, 2020 and
2019, respectively. The losses during the nine months ended September 30, 2020 and 2019 are primarily attributable to the payment
of £126.0 million and £60.1 million (including £25.7 million during the third quarter of 2019), respectively, of aggregate redemption
premiums. For additional information concerning our losses on debt extinguishment, net, see note 7 to our condensed consolidated
financial statements.
Income tax benefit (expense)
We recognized income tax benefit (expense) of £209.2 million and (£1.8 million) during the three months ended September
30, 2020 and 2019, respectively.
The income tax benefit during the three months ended September 30, 2020 differs from the expected income tax benefit of
£3.9 million (based on the U.S. federal income tax rate of 21.0%) primarily due to the net positive impact of (i) an increase in
deferred tax assets in the U.K. due to an enacted change in tax law and (ii) certain permanent differences between the financial
and tax accounting treatment of interest and other items, including £25.9 million related to a one-time technology-related transfer
pricing transition fee, as described in note 10 to our condensed consolidated financial statements. The net positive impact of these
items was partially offset by the negative impact of certain permanent differences between the financial and tax accounting treatment
of items associated with investments in subsidiaries.
The income tax expense during the three months ended September 30, 2019 differs from the expected income tax benefit of
£9.9 million (based on the U.S. federal income tax rate of 21.0%), primarily due to the net negative impact of (i) certain permanent
differences between the financial and tax accounting treatment of items associated with investments in subsidiaries, (ii) statutory
tax rates in certain jurisdictions in which we operate that are lower than the U.S. federal income tax rate and (iii) an increase in
valuation allowances. The net negative impact of these items was partially offset by the net positive impact of an increase in
deferred tax assets in the U.K. due to enacted changes in tax law.
We recognized income tax benefit of £222.0 million and £5.1 million during the nine months ended September 30, 2020 and
2019, respectively.
The income tax benefit during the nine months ended September 30, 2020 differs from the expected income tax benefit of
£32.0 million (based on the U.S. federal income tax rate of 21.0%) primarily due to the net positive impact of (i) an increase in
deferred tax assets in the U.K. due to enacted change in tax law and (ii) certain permanent differences between the financial and
tax accounting treatment of interest and other items, including £25.9 million related to a one-time technology-related transfer
pricing transition fee, as described in note 10 to our condensed consolidated financial statements. The net positive impact of these
items was partially offset by the net negative impact of (a) statutory tax rates in certain jurisdictions in which we operate that are
lower than the U.S. federal income tax rate and (b) certain permanent differences between the financial and tax accounting treatment
of items associated with investments in subsidiaries.
The income tax benefit during the nine months ended September 30, 2019 differs from the expected income tax benefit of
£46.0 million (based on the U.S. federal income tax rate of 21.0%), primarily due to the net negative impact of (i) certain permanent
differences between the financial and tax accounting treatment of items associated with investments in subsidiaries, (ii) statutory
tax rates in certain jurisdictions in which we operate that are lower than the U.S. federal income tax rate, (iii) a decrease in deferred
tax assets in the U.K. due to changes in enacted tax law and (iv) an increase in valuation allowances.
60
For additional information concerning our income taxes, see note 9 to our condensed consolidated financial statements.
Net earnings (loss)
During the three months ended September 30, 2020 and 2019, we reported net earnings (loss) of £190.4 million and (£49.1
million), respectively, including (i) operating income of £59.9 million and £19.2 million, respectively, (ii) net non-operating expense
of £78.7 million and £66.5 million, respectively, and (iii) income tax benefit (expense) of £209.2 million and (£1.8 million),
respectively.
During the nine months ended September 30, 2020 and 2019, we reported net earnings (loss) of £69.6 million and (£214.1
million), respectively, including (i) operating income of £227.8 million and £51.5 million, respectively, (ii) net non-operating
expense of £380.2 million and £270.7 million, respectively, and (iii) income tax benefit of £222.0 million and £5.1 million,
respectively.
Gains or losses associated with (i) changes in the fair values of derivative instruments and (ii) movements in foreign currency
exchange rates are subject to a high degree of volatility and, as such, any gains from these sources do not represent a reliable source
of income. In the absence of significant gains in the future from these sources or from other non-operating items, our ability to
achieve earnings is largely dependent on our ability to increase our operating income to a level that more than offsets the aggregate
amount of our (a) interest expense, (b) other non-operating expenses and (c) income tax expense.
Subject to the limitations included in our various debt instruments and the pending formation of the U.K. JV, we expect that
Liberty Global will continue to cause our company to maintain our debt at current levels relative to our Covenant EBITDA. As a
result, we expect that we will continue to report significant levels of interest expense for the foreseeable future. For information
concerning our expectations with respect to trends that may affect certain aspects of our operating results in future periods, see
the discussion under Overview above. For information concerning the reasons for changes in specific line items in our condensed
consolidated statements of operations, see the above discussion.
Material Changes in Financial Condition
Sources and Uses of Cash
Cash and cash equivalents
At September 30, 2020, we had cash and cash equivalents of £217.2 million, all of which was held by our subsidiaries. The
terms of the instruments governing the indebtedness of certain of these subsidiaries may restrict our ability to access the liquidity
of these subsidiaries. In addition, our ability to access the liquidity of our subsidiaries may be limited by tax and legal considerations
and other factors.
Liquidity of Virgin Media
Our sources of liquidity at the parent level include (i) our cash and cash equivalents, (ii) funding from LG Europe 2 (and
ultimately from Liberty Global or other Liberty Global subsidiaries) in the form of loans or contributions, as applicable, and (iii)
subject to the restrictions noted above, proceeds in the form of distributions or loans from our subsidiaries. For information regarding
limitations imposed by our subsidiaries’ debt instruments, see note 7 to our condensed consolidated financial statements.
The ongoing cash needs of Virgin Media include corporate general and administrative expenses. From time to time, Virgin
Media may also require cash in connection with (i) the repayment of outstanding debt and related-party obligations (including the
repurchase or exchange of outstanding debt securities in the open market or privately-negotiated transactions), (ii) the satisfaction
of contingent liabilities or (iii) acquisitions and other investment opportunities. No assurance can be given that funding from LG
Europe 2 (and ultimately from Liberty Global or other Liberty Global subsidiaries), our subsidiaries or external sources would be
available on favorable terms, or at all.
Our parent company, Virgin Media, and certain Liberty Global subsidiaries are co-guarantors of the indebtedness of certain
other Liberty Global subsidiaries. We do not believe these guarantees will result in material payments in the future.
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Liquidity of our subsidiaries
In addition to cash and cash equivalents, the primary sources of liquidity of our operating subsidiaries are cash provided by
operations and any borrowing availability under the VM Credit Facilities. For details of the borrowing availability of the VM
Credit Facilities, see note 7 to our condensed consolidated financial statements.
The liquidity of our operating subsidiaries generally is used to fund property and equipment additions, debt service requirements
and other liquidity requirements that may arise from time to time. For additional information regarding our consolidated cash
flows, see the discussion under Condensed Consolidated Statements of Cash Flows below. Our subsidiaries may also require
funding in connection with (i) the repayment of outstanding debt, (ii) acquisitions and other investment opportunities or (iii)
distributions or loans to Virgin Media, Liberty Global or other Liberty Global subsidiaries. No assurance can be given that any
external funding would be available to our subsidiaries on favorable terms, or at all.
Capitalization
At September 30, 2020, the outstanding principal amount of our consolidated third-party debt, together with our finance lease
obligations, aggregated £12,137.6 million, including £1,872.9 million that is classified as current on our condensed consolidated
balance sheet and £9,400.1 million that is not due until 2026 or thereafter. For additional information regarding our debt and finance
lease maturities, see notes 7 and 8, respectively, to our condensed consolidated financial statements.
As further discussed in note 4 to our condensed consolidated financial statements, we use derivative instruments to mitigate
foreign currency and interest rate risk associated with our debt instruments.
Our ability to service or refinance our debt and to maintain compliance with the leverage covenants in our credit agreements
and indentures is dependent primarily on our ability to maintain or increase our Covenant EBITDA and to achieve adequate returns
on our property and equipment additions and acquisitions. In addition, our ability to obtain additional debt financing is limited by
incurrence-based leverage covenants contained in the various debt instruments of our subsidiaries. In this regard, if our Covenant
EBITDA were to decline, our ability to obtain additional debt could be limited. We do not anticipate any instances of non-compliance
with respect to any of our subsidiaries’ debt covenants that would have a material adverse impact on our liquidity during the next
12 months.
Notwithstanding our negative working capital position at September 30, 2020, we believe that we have sufficient resources
to repay or refinance the current portion of our debt and finance lease obligations and to fund our foreseeable liquidity requirements
during the next 12 months. However, as our maturing debt grows in later years, we anticipate we will seek to refinance or otherwise
extend our debt maturities. No assurance can be given that we will be able to complete these refinancing transactions or otherwise
extend our debt maturities. In this regard, it is not possible to predict how political and economic conditions (including with respect
to the COVID-19 pandemic), sovereign debt concerns or any adverse regulatory developments could impact the credit markets
we access and, accordingly, our future liquidity and financial position. Our ability to access debt financing on favorable terms, or
at all, could be adversely impacted by (i) the financial failure of any of our counterparties, which could (a) reduce amounts available
under committed credit facilities and (b) adversely impact our ability to access cash deposited with any failed financial institution
and (ii) tightening of the credit markets. In addition, sustained or increased competition, particularly in combination with adverse
economic or regulatory developments, could have an unfavorable impact on our cash flows and liquidity.
All of our consolidated third-party debt and finance lease obligations at September 30, 2020 have been borrowed or incurred
by our subsidiaries. For additional information concerning our debt and finance lease obligations, see notes 7 and 8, respectively,
to our condensed consolidated financial statements. For information regarding the potential impact of the COVID-19 pandemic
on our company's liquidity, see the discussion included above in Overview.
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Condensed Consolidated Statements of Cash Flows
Summary. Our condensed consolidated statements of cash flows for the nine months ended September 30, 2020 and 2019 are
summarized as follows:
Nine months ended
September 30,
2020 2019 Change
in millions
Net cash provided by operating activities ............................................................................. £ 1,470.4 £ 1,256.1 £ 214.3
Net cash used by investing activities..................................................................................... (669.9) (360.3) (309.6)
Net cash used by financing activities .................................................................................... (607.5) (868.7) 261.2
Effect of exchange rate changes on cash and cash equivalents and restricted cash .............. 1.6 0.2 1.4
Net increase in cash and cash equivalents and restricted cash ......................................... £ 194.6 £ 27.3 £ 167.3
Operating Activities. The increase in net cash provided by our operating activities is primarily attributable to the net effect of
(i) an increase in cash provided by our Segment Adjusted EBITDA and related working capital items, (ii) an increase in cash
provided due to lower cash paid for interest and (iii) a decrease in cash provided to higher cash payments related to derivative
instruments. Segment Adjusted EBITDA is a non-GAAP measure, which investors should view as a supplement to, and not a
substitute for, GAAP measures of performance included in our condensed consolidated statements of operations.
Investing Activities. The increase in net cash used by our investing activities is primarily attributable to an increase in cash
used of £320.3 million related to higher net advances to related parties.
The capital expenditures we report in our condensed consolidated statements of cash flows do not include amounts that are
financed under capital-related vendor financing or finance lease arrangements. Instead, these amounts are reflected as non-cash
additions to our property and equipment when the underlying assets are delivered and as repayments of debt when the principal
is repaid. In this discussion, we refer to (i) our capital expenditures as reported in our condensed consolidated statements of cash
flows, which exclude amounts financed under capital-related vendor financing or finance lease arrangements, and (ii) our total
property and equipment additions, which include our capital expenditures on an accrual basis and amounts financed under capital-
related vendor financing or finance lease arrangements.
A reconciliation of our consolidated property and equipment additions to our consolidated net capital expenditures as reported
in our condensed consolidated statements of cash flows is set forth below:
Nine months ended
September 30,
2020 2019
in millions
Property and equipment additions............................................................................................... £ 810.2 £ 886.0
Assets acquired under capital-related vendor financing arrangements....................................... (548.0) (625.7)
Assets acquired under finance leases .......................................................................................... — (5.4)
Changes in current liabilities related to capital expenditures, net (including related-partyamounts) .................................................................................................................................. 50.8 70.6
Capital expenditures, net .......................................................................................................... £ 313.0 £ 325.5
The decrease in our property and equipment additions during the nine months ended September 30, 2020, as compared to the
corresponding period in 2019, is primarily due to the net effect of (i) a decrease in expenditures for the purchase and installation
of customer premises equipment, (ii) an increase in baseline expenditures, including network improvements and expenditures for
property and facilities and information technology systems, and (iii) a decrease in expenditures for new build and upgrade projects,
including the Network Extension.
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Financing Activities. The decrease in net cash used by our financing activities is primarily attributable to the net effect of (i)
a decrease in cash used of £186.5 million due to higher net borrowings of related-party debt, (ii) a decrease in cash used of £90.0
million due to higher cash receipts related to derivative instruments, (iii) an increase in cash used of £78.9 million due to higher
payments of financing costs and debt premiums and (iv) a decrease in cash used of £76.9 million related to lower net repayments
of third-party debt and finance lease obligations.
Contractual Commitments
The following table sets forth the pound sterling equivalents of our commitments as of September 30, 2020:
Payments due during:
Remainder of 2020 2021 2022 2023 2024 2025 Thereafter Total
in millions
Debt (excluding interest):
Third-party......................... £ 513.0 £ 1,366.8 £ 27.2 £ 319.7 £ 26.0 £ 469.1 £ 9,366.7 £12,088.5
Related-party ..................... — 232.1 — — — — — 232.1
Finance leases (excludinginterest)............................. 1.0 4.1 6.2 4.0 0.2 0.2 33.4 49.1
Operating leases ................... 9.0 33.9 28.3 25.0 20.7 11.0 50.7 178.6
Programming commitments .................... 187.1 600.6 244.0 11.6 11.3 11.2 13.1 1,078.9
Network and connectivitycommitments .................... 175.7 277.6 53.4 11.3 4.2 2.9 12.6 537.7
Purchase commitments ........ 122.3 102.5 12.8 1.7 0.1 0.1 — 239.5
Other commitments.............. 4.8 9.7 1.5 — — — — 16.0
Total (a) ........................... £ 1,012.9 £ 2,627.3 £ 373.4 £ 373.3 £ 62.5 £ 494.5 £ 9,476.5 £14,420.4
Projected cash interestpayments on third-partydebt and finance leaseobligations (b) .................. £ 121.9 £ 534.4 £ 458.4 £ 455.4 £ 451.2 £ 449.1 £ 1,462.2 £ 3,932.6
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(a) The commitments included in this table do not reflect any liabilities that are included on our September 30, 2020 condensed
consolidated balance sheet other than debt and lease obligations. Our liability for uncertain tax positions (£26.4 million at
September 30, 2020) has been excluded from the table as the amount and timing of any related payments are not subject to
reasonable estimation.
(b) Amounts are based on interest rates, interest payment dates, commitment fees and contractual maturities in effect as of
September 30, 2020. These amounts are presented for illustrative purposes only and will likely differ from the actual cash
payments required in future periods. In addition, the amounts presented do not include the impact of our interest rate
derivative contracts, deferred financing costs, original issue premiums or discounts.
For information concerning our debt obligations, finance and operating lease liabilities and commitments, see notes 7, 8 and
11, respectively, to our condensed consolidated financial statements.
In addition to the commitments set forth in the table above, we have significant commitments under (i) derivative instruments
and (ii) defined benefit plans and similar agreements, pursuant to which we expect to make payments in future periods. For
information regarding projected cash flows associated with these derivative instruments, see Projected Cash Flows Associated
with Derivative Instruments below. For information regarding our derivative instruments, including the net cash paid or received
in connection with these instruments during the nine months ended September 30, 2020 and 2019, see note 4 to our condensed
consolidated financial statements.
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Projected Cash Flows Associated with Derivative Instruments
The following table provides information regarding the projected cash flows associated with our derivative instruments. The
pound sterling equivalents presented below are based on interest rate projections and exchange rates as of September 30, 2020.
These amounts are presented for illustrative purposes only and will likely differ from the actual cash payments or receipts required
in future periods. For additional information regarding our derivative instruments, see note 4 to our condensed consolidated financial
statements.
Payments (receipts) due during:
Total Remainder
of 2020 2021 2022 2023 2024 2025 Thereafter
in millions
Projected derivative cash payments(receipts), net:
Interest-related (a) ........................ £ (137.1) £ 89.1 £ 51.5 £ 46.1 £ 29.4 £ 69.3 £ 41.6 £ 189.9
Principal-related (b)...................... — (41.9) — 0.4 (53.9) (435.5) 142.4 (388.5)
Other (c) ....................................... — 0.3 0.6 — — — — 0.9
Total........................................... £ (137.1) £ 47.5 £ 52.1 £ 46.5 £ (24.5) £(366.2) £ 184.0 £ (197.7)
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(a) Includes (i) the cash flows of our interest rate cap, floor, swaption and swap contracts and (ii) the interest-related cash flows
of our cross-currency and interest rate swap contracts.
(b) Includes the principal-related cash flows of our cross-currency swap contracts.
(c) Includes amounts related to our foreign currency forward contracts.